According to the report released by the National Academy Economic Strategy of Chinese Academy of Social Sciences (CASS), China’s economic growth may slow down slightly to 6.6 percent in the third quarter of 2018 and further fall back to 6.5 percent in the fourth quarter. A complicated international environment and new changes in China’s domestic economy, people believe that the Chinese government has sufficient policy tools to maintain the economic growth. Some may argue that economic nationalism emphasise domestic control of the economy, labour and goods, in many case economic nationalists oppose globalization or the benefit of unrestricted free trade. There are many arguments against economic nationalism policies, especially based on nations. The Chinese government embraces change and has a mature and sensible understanding of economic development, as indicated by its economic policy adjustments in recent years, the expert said, adding that these adjustments will benefit China’s economy in the long run. Great economic performance does not prove the ability to take more responsibilities in the global market. However, I agree to a certain extent that economic nationalism can overcome market imperfections in the global economy and trade asymmetries. In this essay, I examine the fundamental of economic nationalism theory, and compare with the liberal theory. Moreover, I would discuss economic nationalism in the context of China, by examine the role of inter-national or mulita-national and trans-national. If China could maintain stable economic growth and social stability, it can overcome and handle the political economy situation in the world by further evaluating the role of a big country and the responsibility in the world leading position.
The definition of mercantilism is ‘an economic philosophy and practice of government regulation of a nation’s economic life to increase state power and security. Policies of import restriction and export promotion follow from this goal’ (Balaam and Veseth 2001:464). The term ‘mercantilism’ is associated with state-centred as opposed to market based practices. Governments protect goods and capital largely in order to protect jobs. Current debates about economic nationalism and the theoretical justifications for pursing political agendas, these debates seem to revolve around questions of free trade or protectionism. However, free trade is more of an ideal than an existing reality.
New Trade Theory is grounded in historical practice of mercantilism and economic nationalism. It suggests that the poorer-country perspectives of systematic power and recognise how richer countries can use asymmetries to their advantage and gain through trade restrictions or subsidies. It avoids separation of state and market, focus on state facilitation of trade. Its strategic implications argue about how rich countries can ‘kick away the ladder’, they represent a substantial theoretical improvement on the theory of comparative advantage. However, New Trade Theory provided further reasons for expecting international trade to be uneven and contested and for expecting large, rich countries to do best (Dunn 2015, p.70). Liberal response to static nature ‘old’ liberal trade theory of comparative advantage by incorporating geography and history. Moreover, it does not explain why countries with similar endowments trade with each other. Ha-Joon Chang ?Chang 2002?argues that economics and politics are inextricably linked and that there’s no fixed boundary between the State and the market. Criticisms of economic nationalism such as Marx directly criticised List for wanting to benefit from domestic market while restricting the international market. The Prebish-Singer theory claims that the terms of trade of primary products tend to decline relative to those of manufactured goods (Brolin 2006). Singer acknowledges that foreign trade and export-oriented primary producing sectors in developing countries could be the most capital intensive and efficient within those economies. Prebisch’s argument is based on ‘imperfections’ in labour markets. His argument particularly identifying the absence of full employment and perfect competition among workers as the fundamental flaws in comparative advantage. Dunn (2015, p. 63) summaries the fundamental problems are the differences in labour markets between rich and poor countries. In various ways it becomes clear that a static comparative advantage in primary products provides insufficient grounds for trade-based prosperity. The Keynesian tradition developed important criticisms of mainstream economics, underpinned by a recognition that markets were imperfect (Dunn 2015, p. 64). As monopoly allows firms to raise prices at a national level, tariffs could have the same effect of improving the terms of trade (Kaldor 1940). The role and cooperation of rich country multinational corporations producing tropical foodstuffs within poorer countries also helps prices down (Robinson 1979). Enduring asymmetries of wealth and power leave difficult questions about the basic premises of conventional trade theory and claims that voluntary opening implies that national economies will benefit.
The success of the Asian Tigers was held out as demonstrating that free trade represented a better option for poor countries. The experience of successful Export-Oriented Industrialisation confirmed rather than refuted the fundamental asymmetry of the global trading system (Dunn 2015, p. 66). Countries such as Singapore “brand” the entire nation as a well-functioning city, a destination for foreign direct investment with everything from world-class infrastructure to high-end shopping. Thus China’s economic rise is associated with Chinese business expansion (Gerth 2012, p.203). Market imperfections and asymmetries continued to remain a source of conflict, even as more and more countries became open to trade. While the success of the Four Tigers and subsequently of other countries in Asia makes clear that, increasing trade and economic development are perfectly compatible, people could still identify many aspects in which trade openness and free trade were not equivalents. All of this contrasts with notions of free trade and free markets based on price signals automatically adjusting supply and demand.
The great economic performances came from the Chinese government’s recent proposal of a target to “stabilize the employment, finance, foreign trade, foreign investment, investment and expectations”, collectively known as the “six stabilities”. Steve Vickers shares his thoughts on “Economic Nationalism in China” at the Singapore Institute of International Affairs, he mentions that China’s current leader, President Xi Jinping, embodies a more assertive and stronger China. This has been reflected in the country’s government policies, and various political tools used by Xi to consolidate power and weaken other power centres in the political system, such as the nation-wide anti-corruption campaign. The business environment in China is getting increasingly complex to operate. A recent American Chamber survey revealed that 49 percent of US firms felt they are treated unfairly in China, in order to remove foreign competition and protect local brands.
Since the late nineteenth century, China’s leadership has developed a strong sense of economic nationalism and demonstrated a willingness to make any sacrifice to develop world-class industries in the name of “national survival,” including sacrificing the well-being of China’s workers and the health of its environment. In the current post-industrial world, Chinese leaders see ownership and control over world-class brands as the next battleground, the key to continued economic development (Gerth 2012, p.217). In mid-May 2017, china hosted the Belt and Road Form for International Cooperation. While Xi visiting Kazakhstan and Indonesia in 2013, he proposed jointly building the Silk Road Economic Belt and the 21st century Maritime Silk Road respectively. Since ancient times, peaceful development has been a shaped goal of mankind. Today’s world is filled with uncertainties, therefore, Xi proposed this concept with a focus on connectivity, and free and convenient flow of all elements of production will be encouraged, and mutual gains and shared development achieved. The Belt and Road Initiative draws inspirations from the ancient Silk Road, and aims to help realise the shared dream of people worldwide for peace and development. For more than three years, over 100 countries and international organisations have responded positively and offered support for the imitative. Xi mentioned that the world should join hands in forging new partnerships characterized by win-win cooperation and build “community of shared future for mankind”.
Additionally, the phrase appeared prominently in Xi Jinping’s 19th Party Congress Speech: “China champions the development of a community of shared future for mankind and has encouraged the evolution of the global governance system. With this, we have seen a further rise in China’s international influence, ability to inspire, and power to shape, and China has made a great contribution to global peace and development.” Yet the Western countries seen the phrase as a reflection of China’s growing ambition for a dominate role in global governance because of its newfound great power status. China has “no intention to interfere in other countries’ internal affairs, export our own social system and model of development, or impose our own will on others.”, only focus on “big family of harmonious co-existence”. The main underlying theme is similar to the 2003 “Peaceful Rise” slogan: a politically, economically, and militarily strong China will be a force for global peace. China’s authorities have argued that the West’s attempts to forcefully impose its democratic institutions and values has led to wars and military conquest. On the hand, “peace has been in the blood of us Chinese and a part of our DNA” said Xi in Geneva.
Mao Zedong’s regime aimed to turn cities known for their consumption into centers of production instead, emulating the Soviet Union’s economic model with its emphasis on state-owned heavy industry over consumer goods, and gradually forced foreign multinationals to leave China and eliminated most foreign products from store shelves. The International Monetary Fund (IMF) comment on China’s economic record, “over 800 million people have been lifted out of poverty and the country has achieved upper middle-income status.” In addition, the IMF noted that persistent trade imbalances are “putting the global economy at risk.” Thirty years later, with the start of Deng Xiaoping’s economic reforms and the policy known as “opening to the outside world,” or simply the Open Door Policy, China slowly began to permit the import of consumer goods. National governments like to see healthy trade surpluses and undertake open-market operations to weaken their currency and help their exporters. They also protect high-tech and infant industries. Meanwhile nationalist consumers prefer national brands, and national networks freeze out exporters. As with WTO membership in 2000, allowing greater access for imports to domestic markets was a small price to pay to gain better access to foreign consumer markets for Chinese products (Gerth 2012, p.211). In 2002, the Chinese state further strengthened its control over large companies by creating the very powerful if infelicitously named State Assets Supervision and Administration Council. Where China once invited in foreign investors with its Open Door Policy, since the early 1990s it has also been laying the groundwork for these new Chinese conglomerates to exit through that door. For instance, the Chinese government has used SASAC to entice them to “go global” with favorable policies, including the abolition of foreign currency restrictions for overseas investment (Bellabona and Spigarelli 2007). Although accepting WTO restrictions ostensibly promises a level playing field for foreign products in China, Chinese leaders continue to use government policies to create non-tariff barriers to foreign trade. For example, the China National Tobacco Corp. (CNTC), a government monopoly, still controls 90% of the domestic cigarette market, helped by non-tariff barriers such as the regulations governing new cigarette factories, limits on the number of sales offices, and provincial-level quotas to preserve its market share. Successful foreign brands, most notably Philip Morris’ Marlboro, are allowed to enter the market only by producing their branded cigarettes at CNTC-affiliated factories. These “partnerships” allow CNTC to limit competition, acquire new technology, leverage a high-profile international brand, and gain access to overseas markets. And these barriers can also be erected at the local and provincial level (Gerth 2012, p.213).
All in all, economic nationalist approaches to trade are not anti-trade. Free trade has not been the historical norm. One strand of argument, recognizing the structural asymmetries in the global economy and the unfree nature of trade in practice, sets as its objective the establishment of more symmetrical and freer practices (Dunn 2015, p.70). Trade is itself a diverse and contested social process, inescapably linked to the broader political economy.
Theory should acknowledge role of the state in trade, for instance, China has made clear through public documents that it not only wants to lead the world in the industries of the future, but it intends to be essentially self-sufficient in those sectors and actively seeking a dominant position. At the same time, trade is managed by states, firms and international organisations. Each nation’s stimulus plan should embrace open markets, even if some foreigners will benefit. Similarly, financial regulators should leave the re-regulation of cross-border banking. The IMF and the development banks should help to meet emerging markets’ shortfall in capital. The World Trade Organisation can help to shore up the trading system as well. When economic conflict seems more likely than ever, what can persuade countries to give up their trade weapons? Leadership is the only chance. The international economic system depends upon a guarantor, prepared to back it during crises. In the 19th century Britain played that part. During the Financial Crisis, China did a really impressive job and proved to the world with its sustained economic growth performance, hence, the benefits from trade are shaped by institutions not theory. In short, China has the ability to overcome market imperfection in the world economy and trade asymmetries by applying economic nationalism policies.
