[Part of what follows is my English translation of a Chinese-language interview in the People’s Daily (02 April 2015); but it’ll be different due to my faulty memory and to space constraints in that official publication. Also, this was an interview: what follows won’t have tight phrasing, and it’s not going to have tables and graphs. The background is that I’d earlier calculated how even if China’s growth slowed to as little as 7% in 2015, the Chinese economy would still, for most of the world, provide a 50% increase in new export market opportunity compared to when China was growing at 12% a decade earlier. At current rates of labour productivity, China growing at 7% over 2015 could still generate scores of millions of new jobs for China’s workers. The People’s Daily journalist knew this, and so her interview with me took that as given. The ensuing is what I remember discussing with the journalist thereafter. Some but not all of it appears in the Chinese-language version.]
In China, the "New Normal" isn’t what it is in the West. In the West, the term emerged in the wake of 2008 GFC, when observers thought that the world economy would never really recover or if it did, that recovery would be weak and anaemic. The New Normal meant that even though total collapse was no longer imminent – in that sense we weren’t in immediate danger – neither were we out of danger altogether. And indeed we would never be completely out of danger.
Many English speakers use "New Normal" that way, to describe when good times will never return. Old people who now can’t run as fast as they used to, or men and women who have grown obviously less youthful, who might have put on weight, and even after severe dieting will never be as they were before. All these are examples that in the West people jokingly refer to as a New Normal. So too, then, the New Normal in the world economy: growth overall will never be as before. For discussing the global economy, again in the West, many observers also use "secular stagnation".
We now know China and many parts of East Asia did not experience the same deep downturn. In this, your part of the world accomplished two things: First, you saved the world economy – there is no other way to put this (and if China and others are facing debt problems now, that’s a result partly of what you’d done when the rest of the world simply failed). Second, you put the lie to the view that "China or the East grew only because the West imported". China and the rest of Developing Asia have shown a growth dynamic that while not completely decoupled from the West is at least potentially self-sustaining.
It’s not a total surprise, therefore, that in China "New Normal" is not a slowdown but a rebalancing and indeed an improvement of the state of China’s economy: You see opportunity where others face only doubt and fear and uncertainty. In China policies will be adjusted, the economic structure will be re-born, historical inefficiencies will be shaken out.
My own hope is that China’s policy-makers also think seriously of re-balancing geographically, i.e., from East to West within China: in one fell swoop this will resolve many issues: it will alleviate the hukou problem; it will lower pressure on the East coast’s being polluted, over-crowded, over-priced, and creaking under stress; it will reduce income inequality and continue poverty reduction; and it will maintain at a high level the marginal returns to physical capital.
For China this very positive "New Normal" comes obviously with reforms and changes: some I think are very exciting, and others just plain boring and to be expected – but both kinds are important and necessary. Among these will be technological advances (both information and green tech, renewable energy); raised consumption and standards of living, improved access to financial products so that the benefits of high savings are returned directly to the people who save; upgraded administrative and public services.
All of these are moves towards sustainability on the one hand, and improving the quality of life for all its citizens, on the other.
There are of course risks in all these: Political reforms and anti-corruption campaigns will always meet pushback from vested interests. Liberalising markets and political systems at an incorrect pace and in inappropriate sequence can destabilize economies and seriously disrupt economic growth. But if China proceeds cautiously, as China has done for the last three decades, one can be reasonably optimistic.
The large danger, in my view, is international. Some policy-makers out there continue to carry in their minds some version of a Cold War mentality. They perceive the global community of nations as a network constantly dividing into camps, notably one organised around the US and the TransAtlantic Axis; another around the emerging new powers. China is significantly in the latter: Sure, yet other nations can show similar growth trajectories but do not have the heft to raise concern. For instance, historically as well as now, Singapore, in this accounting, could be safely put to one side, no matter how fast it grew and how successful its economy became. But not China – which, whatever it does, under this Cold War mentality will always present a threat to the established order.
This Cold War mentality endows its adherents with a perspective on the world that is "Zero Sum" – one side can gain only when the other side loses. Contrast that with the more positive win-win perspective that China’s leaders espouse.
No good ever comes of anything once a Zero-Sum perspective sets in. Take the Asian Infrastructure Investment Bank (AIIB) as one example. What does the AIIB seek? Help developing countries grow. Build infrastructure. Improve transportation and communications. Whatever could be wrong with any of that? But a Zero-Sum view divides the world into opposing camps, and the AIIB is then seen as an way to expand China’s circle of influence and therefore – via the Zero-Sum mentality – reduce the US’s. So the US must oppose the AIIB: on environmental standards, procurement safeguards, lending requirements. When China says it will keep standards high, from say its own current anti-corruption crackdown, a zero-sum perspective refuses to acknowledge this might actually be a good thing. Instead, everything about the AIIB becomes just another way to win influence, widen China’s circle of allies, and eventually challenge the US in who gets to write the rules of the game on international engagement and economic exchange.
Sure, we’re talking now not just about China’s New Normal domestically but the AIIB. I think of these as not unrelated. Here’s the thing, this Zero-Sum perspective is refreshing those days when world leadership meant "might is right". Those were not good times.
We have to remember that the US, at its most successful, was taken to be world leader not only because it was the world’s largest economy or wielded the biggest guns or won the most Nobel Prizes or had the deepest financial markets. Instead, the US was world leader because the US – not anyone else – opened up the international system. It created a world order that was liberal, transparent, inclusive, and democratic. The paradox was how by giving away power and allowing others to have greater voice, the US actually consolidated its own position. But it did, spectacularly successfully.
All that, in many eyes, changed when the US became instead practically petulant – last month lashing out, for instance, at the UK for "constant accommodation of the rising power" that is China. The US now seems to believe that by simply being the repository of greatest power [whether military, economic, soft, or otherwise] it should be allowed to dominate the world order. Perhaps the community of nations finds such a configuration not quite so attractive. This might, indeed, well be the US’s Delian Moment.
In this global New Normal, China’s narrative will be, "We are far from perfect. But we understand how hard it is to develop and grow an economy. Even if we don’t get it right, and we certainly won’t get it right for you, we understand the difficulty. Here’s help." This chimes well with China’s long-standing policy of Peaceful Rise. And this simple idea could well end up as the narrative that wins over the world’s 6.5bn people who don’t live along the TransAtlantic Axis and who never quite got to be part of the age of US unipolarity.