In China, nothing or just about, occurs by chance. So the choice of the city of Hangzhou to host heads of states participating to the G20 Summit, has a deep sense. This city was China capital during the Song dynasty, at a time when the country was starting to attract attention from the West. Then it was put in the shade by Beijing, of course, and, much later, by its neighbor, Shanghai, which became, from the 19th century, the economic hub of the country. But it was in Hangzhou, during the seventies, that secret discussions took place between Henry Kissinger and Chou en Lai, which lead to the recognition of mainland China by the Nixon administration. And, again, it was in Hangzhou, on the shores of the West Lake, that Hank Paulson, George Bush Treasury secretary and his Chinese counterpart discussed the terms of the strategic and economic partnership between the two countries. Two years ago, Beijing launched its first great economic international initiative, the Belt and Silk Road project, by reference to the passed role of the Middle Empire in trade with Europe at the eve of the Middle Age. The purpose was to finance major infrastructure programs in neighboring countries in order to support their development. They would become the clients China will need tomorrow to provide its enterprises with new markets. This year, in Hangzhou, the purpose was quite different: to show that the country can handle discussions with developed countries on equal terms. China doesn’t anymore consider and doesn’t want to be considered as an emerging country. President Xi Jinping has gathered around him BRICS leaders, but that was symbolic. The purpose of this meeting was to show that his country received a mandate to expose to the developed countries emerging nations aspirations. And how impressive progress have been made since last year!
Last summer, financial markets were shaken by a double crisis. Shanghai stock market was hurt by a brutal fall, which followed an unrestrained speculation wave. And the announcement by the Chinese central Bank that it was going to modify its parity fixation policy created a real panic on exchange markets. Comments, in Western countries, and especially in France, were severe to the point they were forecasting the beginning of the end of the Chinese miracle. Nothing like that happened and it is what Hangzhou Summit has demonstrated: China economic strategy has not been put in doubt by any participant. And nobody put in question its ability to manage its evolution toward a more balanced economy between industry and services, for instance. Shanghai stock market index have regained a part of their losses and they have stabilized around the 3000 level. And Hong Kong, where are listed Chinese companies and companies operating in China, is hitting record level, which reflects the good health of the economy of the area. Regarding the Yuan, it has stabilized, not against the dollar with which it lost around 10%, but against the average value of its major trade partner currencies. Progress in the process of internationalization of the Chinese currency have been validated by the IMF which has included it with a 11% share in the basket of currencies used to issue Special Drawing Rights. World Bank chairman has decided, as a signal, to issue bonds denominated in Yuan at the eve of the Summit, to show off, if it was anymore needed, the confidence, international institutions have in the Chinese currency. Beijing had created, two years ago, a competing financial institution. So, it was not useless to give assurance. And a major French company, Veolia, very active in the area, had also issued “panda bonds”, as private bonds issuance dedicated to local investors are nicknamed.
The trust, which was put in doubt a year ago, regarding China situation, has now come back. Annual growth is stabilized between 6.5 and 7%, as forecast in the national Plan. It is definitely inferior to the levels reached during the first years of the Chinese miracle, but the size of the economy has been multiplied by five and the impact on the world economy is still very important, especially in the current context of quasi stagnation of the developed economies. Nobody put in doubt the difficulties China will face in its transition process to an economy more oriented to services and in the reduction of current overcapacities in its mines and its heavy industries. But we don’t know why the country wouldn’t overcome them at least as well as England with its miner strikes or as France when it was necessary to restructure the steel and the car industries. Regarding local authorities and state-own company debt burden, frequently considered as excessive, Western countries are not in a favorable position to lecture anyone. Huge currency reserves and structural surplus of China current account balance should reassure. And the decision, taken by political leaders, of moralizing economic behaviors and refusing to systematically bail-out poorly managed companies, are beneficial and should bear fruits in the future.
China is definitely a great political power. At Hangzhou, it showed it has become also a great economic power, in dealing as equals with the United States, regarding,for instance, global warming issues. About that, very few have noticed that the reason why Barack Obama did not need approval by the Congress is that there is no formal obligation in the Paris Agreement. Beijing has also joined its voice to criticisms made by the IMF to Western countries, Germany being implicitly targeted, which have a too restrictive budgetary policy and which excessively rely on monetary policies. The Chinese president plea in favor of globalization and free trade, and his message toward developed countries leaders, confronted, at home, with the rise of protectionism and nationalism, appeared as lessons given to his colleagues. In Hangzhou, China has passed a new step. Its influence on world economic issues will rise. We already see a substantial increase of its foreign investments and a more active presence in mergers and acquisitions in developed countries. Its companies will still invest in agricultural properties in Africa and in Australia and build railway lines in Central Asia. But they will go further, and not only in acquiring soccer team. Our companies must adapt to this new situation and prepare themselves to create strategic partnerships in order to take all the possible benefits of this new phase of the globalization process.
The sumptuous representation given during the Hangzhou Summit closing ceremony, where leaders from all around the world had the opportunity to be fully aware of Chinese poetry, to admire Swan Lake ballet and to listen Debussy and the Ode to Joy, was not either without symbols and implications.