Conversation with Martin Wolf, Chief Economics Commentator at FT

CCG | May 12 , 2021



On May 12, the Center for China and Globalization (CCG) hosted a dialogue between Martin Wolf, chief economics commentator and associate editor at the Financial Times and Wang Huiyao, CCG president. Mr. Wolf is a world-renowned journalist covering economics and finance, a strong advocate of globalization and free markets, and the author of a number of influential books including Why Globalization Works and Fixing Global Finance.


Owing to severe impact of the pandemic, the growth of global economy has generally been sluggish at best, while Chinese economy has shown a strong degree of resilience. This discussion covered measures that should be undertaken to promote the recovery of the global economy in post-pandemic times, the role that China will play in that process, as well as how China, the US and the EU can overcome their differences and advance the process of globalization.


This virtual program was part of the CCG “China and the World” webinar series seeking to engage global thought leaders on topics concerning the current situation and dilemmas of globalization and China’s role in it.


Wang HuiyaoThank you and good afternoon, good morning to all our audiences in China and in other parts of the world, this is a really great opportunity to dialogue with a global opinion leader, Martin Wolf on “China and the World in the era of crisis and renewal”. This is part of a series of dialogues we have been conducting lately. We have actually already talked with Kerry Brown, Graham Allison, Thomas Friedman, Joseph Nye, Anthony Saich and this is the sixth episode. I am very honored to have Martin Wolf with us today.

My name is Huiyao (Henry) Wang, founder and president of the Center for China and Globalization and Martin Wolf is a well-known global opinion leader, one of the world’s most influential financial writers. As we all know, he’s the associate editor and chief economic commentator at the Financial Times. And he has been awarded the CBE, (Commander of the Order of the British Empire) in 2000 for services to financial journalism. He graduated from Oxford University and is a visiting fellow of Nuffield College of Oxford University and a Special Professor at the University of Nottingham and was made Doctor of Science (Economics) of University of London. Mr. Wolf is very well-known in the fields of finance, economy and world affairs at large.



He was also a senior economist with a very impressive professional life. He worked as a senior economist in the World Bank between 1971 and 1981 for a decade and joined the Financial Times in 1987 where he has been the associate director since 1990 and chief economic commentator since 1996. He is very influential in terms of finance and economics around the world and has been named in the list of top 100 of the global thinkers by the Prospect and Foreign Policy. He’s the author of highly regarded books including Why Globalization Works, I bought this book at the UN head office in New York, actually a few years ago. Another book is called Fixing Global Finance and his most recent book is The Shifts and the Shocks: What We’ve Learned—and Have Still to Learn—from the Financial Crisis. All his books actually have been translated by China Citic Press Group and this dialogue is actually in partnership with China Citic Press Group as well. He’s a participant in the annual China Development Forum where I met Martin for quite a few times and also, I met him in Singapore and elsewhere in the world too. So Good Morning, Martin and great to have you and maybe you can say a few words to our audiences.


Martin Wolf: So, first of all, it’s a great pleasure to be with you. Thank you very much for having invited me and it’s also an honor. I am always amused when people introduce me as a Commander of the British Empire which just shows, as I like to say, whatever the British have lost in the last century, they haven’t lost their sense of humor. Since obviously the British Empire disappeared very very long time ago, which is a good thing in my view. I’m very pleased to have this dialogue on a crucial subject at a crucial time. We are going through extraordinary transformations in the world order because of economic developments, because of political developments and of course, because of the pandemic. So, we are all being forced to rethink our view of the world how it’s going to evolve and I’ve come to the view I’m just completing a book on the future of the West. But I have come to the view that this decade is looking increasingly – what I refer to – as a hinge of history one of those decisive moments in human affairs which will determine the future of our world for a long time. Will it be prosperous and peaceful? Will we manage our big challenges above all, climate? Will we manage to cooperate satisfactorily or will the order we have created in the last 20 or 30 years – the order of global cooperation for all its failures of globalization – will it collapse? And I think those issues are very much alive and the next 10 years or so is likely to provide us with answers. And I have to say myself I am very concerned about the developments we see, and I’ve been around as has been noted for a long time. And I think this is possibly the most challenging period of my lifetime. I was born, I should say, immediately after the Second World War, so I didn’t experience that catastrophe. But I’ve been alive now for 75 years and this is a very challenging period we’re now entering.


The pandemic spurred technological advances but also intensified inequality and debt



Wang Huiyao: Thanks Martin. You’ve been around for quite some time and you have witnessed all these great changes. I agree with you, you know it’s probably the current contemporary challenge we’re facing is unprecedented. We have with this pandemic that swept all over the world and also with the economy that is slowing down around the world and the global economy is struggling to catch up. So, 2021 is probably to be the year of recovery. Maybe you could give a bit of the outlook. Is this pandemic crisis going to reshape the global economy, the political landscape and the way global governance is conducted? So perhaps you can shed some light on that first?


Martin Wolf: Well, there’s so much to say. I’ll try and keep it brief. So, the first point is the one you noted – we’ve now had two very significant global crises in less than fifteen years. So, the last one was the Western Financial Crisis which I think during the time between 2007 and 2009. But it went on in Europe to 2015, so it was a long crisis and just a few years later we were hit by the pandemic. And that was an event that many have predicted that such a thing could happen, indeed it’s not at all surprising. Humanity has had a long history of experiencing pandemics, nevertheless we didn’t know when it happened and then it happened. And that’s been another huge shock in a way – the global economic crisis. There has ever been in the sense that it affected more countries in the world – basically every country in the world, more profoundly than any other comparable event, at least in modern times. And when I think of modern times I mean really since the Industrial Revolution so about the last two centuries or so, of course, there have been much more damaging pandemics in the past. We think of the Black Death in the 14th Century, but that was so long ago that obviously the memories that have largely gone except in the history books.


Now if we think of the pandemic, so it was global, it was sudden and it led to a very sharp contraction last year particularly in the first half of last year across a very large range of economies and particularly in the West but also a bit earlier in China. Now what can we say about this in terms of its social and economic effects? I think we can say the following things: the first which in a way is the most interesting and important is how big the economic damage was of an event that at least as a pandemic in terms of its fatalities was historically relatively minor. So I look at I’ve been looking at the famous Spanish Flu of 1918, so just over 100 years ago, now nobody knows exactly how many people died then. But the estimates are probably about 50 million, the central estimate which given the population growth will be equivalent to 200 million now. And so far, this pandemic has killed, thank god, fewer than three million/. So it’s a much smaller pandemic in its health effects, but its economic effects have been much bigger as far as we know. Of course, we didn’t measure economies in the way we did a hundred years ago but it’s still much bigger. Why is that? This is the most important point: the important point is our societies and I think this is a very good thing we have an enormous value on human life, and we are prepared to pay enormous economic crisis in order to protect human lives. And that was clear in China when you closed down Wuhan, for example, in order to contain the virus, whatever it cost. And the same was true all across the Western world, we locked and basically closed down our economies. People stayed at home, so even in relatively poor countries, they were locked out. So, we really care about human life, that’s the first really big lesson and I think that’s fantastic.


And the second thing we learned is we have the means to do something about it because our technology has advanced so much. So that we have learned, as we’re now experiencing with this zoom call, we have learned that with modern technology. We couldn’t have done this even 10 years ago, that we can run much of our modern economy without physically meeting now. That generates huge inequality in our societies because the people who can do it this way tend to be the more prosperous, the people with graduate degrees – these are the sort of people can work at a distance with the great exception – the medical profession obviously by and large. People with degrees have been pretty safe. But people who have to work face-to-face with other people have not and that is creating huge social divisions as a result of the pandemic and also, great divergence among countries because some countries which have more advanced economies are able to do much more online than others. So that’s the inequality point we’ve learned that very important.


The third thing we’ve learned is the immense advances in medical science and our ability, which nobody really believed a year ago, to create billions of vaccines, which are distributed very unevenly and very unequally across the world. This is also an extraordinary lesson now. What does this mean? And this is my last point for the immediate future, the countries that have either controlled the disease successfully by other means notably China, but also South Korea, Australia and New Zealand have reopened pretty well. China’s economy is growing, of course, very strongly and of course the countries that have managed mass vaccination programs like the US and now UK and over the next few months Europe will also expand very rapidly. So, I expect a big global recovery ahead this year and next year led by the big economies. Basically, the big Western economies, the advanced Asian economies like China. That is after all, most of the world economy. I mean that’s about 75 to 80% of the world economies roughly. Unfortunately, there are lots of other countries which are in much worse situation. They don’t have the vaccines yet and they’re very dependent on tourists who are still not going to travel. They have some very big problems. Look at India and look at Africa. And then there’s the very final thing: the remnant of the crisis, which is a huge amount of debt, a lot of it dollar debt. Now that’s going to be perfectly manageable, in my view, in the developed countries. But it will be much more problematic in the emerging countries. So we emerge now strongly but very unequally. And perhaps the crisis has generated a lot of ill will, political instability, anger and that has certainly emerged and will affect the shape of relations in future.


Wang HuiyaoYeah, thanks Martin. Thank you for a very timely and broad analysis of the global pandemic situation and I think you’re right, we’ll see the recovery, but it won’t be a straight line, and smooth one which could be zigzags and ups and downs. We’re still seeing things happening in India and we don’t know what’s next, maybe Africa. Or there could be more second or third wave ahead. Also the Chinese president has actually pledged two billion US dollars to the developing countries to fight with the pandemic. I’m glad to see President Biden pledged two billion dollars also at the G7 summit and also that recently, you know, he’s persuaded the pharmaceutical companies giving up the patent of  the vaccine. So, what do you think about that? Do you know how we can quickly turn this around and what are the measures we can take?


Martin Wolf: Well, I’m an agnostic on the value of giving up the patent in this context of this crisis. I’ve been persuaded from the work I’ve done but I must stress I’m an economist not a chemist or a biological scientist. In the case of pharmaceuticals of this kind, having a patent doesn’t really tell you how to make the thing and these are very complicated things to make, and this is particularly true of the new and very exciting mRNA vaccines which have been developed in Germany and in America. So just having the patents won’t mean that suddenly people can produce billions and billions of doses. However, so I think that’s a very interesting issue and it’s a very emotive issue. But I don’t think it affects the next six to eight months or a year possibly even longer and so I think I will put that to one side, though it’s a very interesting issue. It’s quite clear that we have to ramp up production worldwide to something like 10 or 12 billion doses a year and it is very likely that we will have to multiply vaccinate people. That is to say, because this disease as it is now clear mutates very quickly, there are many variants now. So far, the vaccine seemed to work but nobody knows how long that will be the case. So, it’s likely we will have to give booster shots to the world everybody as it were. Now that creates two problems: we have to ramp up production, it is happening, and we will get to that sort of production level probably by the end of the beginning of next year. But it’ll take at least a year or so before we do. And then the crucial question is: can we actually organize the distribution and actual vaccination for pretty much everybody in the world? Because that’s how we want to control this. Friends of mine have pointed out, no one is going to be really safe until the disease is completely under control. Otherwise, the mutations will come back to China to Britain, wherever. So we have a big challenge ahead of us in terms of production and distribution of acting and lots of vaccine-hesitant people.


But the progress we made in this regard is, to my mind, also quite unbelievable. The Chinese vaccines, Russian vaccines, Western vaccines. We have the capacity, without a doubt, if we want, to vaccinate the world and the crucial thing is that major countries, which have the capacity to cooperate, to make sure that it actually happens.


Global governance falling behind global practice


Wang Huiyao: Absolutely I agree that we have to collaborate, and we have to we work together. If we’re going to vaccinate the world – both rich and poor countries together, those countries who already have the advanced technology of vaccines need to work even harder with more coordinated approach.


So, Martin, you are a guru on globalization, you published the book Why Globalization Works in 2004, which is already 16 years ago. For the last 100 years, globalization practice and development that has really generated enormous prosperity in our time but also has now bought unprecedented challenges as well.


So now with the complication of the of vaccine and also the pandemic and the vaccine shortage, and countries now seem to get more hijacked by populism and nationalism. We already have closed borders for travelers and but also economy-wise, there is a lot of downgrading. So what do you see as the future of the globalization? Can we continue globalization? How can we make good adjustment? Maybe we can have more inclusive globalization as you’ve been often writing on your column?


Martin Wolf: So another very big question and it will take a few minutes to answer as the last one. When I analyzed globalization in the book that you referred to which was published also in China as you rightly say, and I think it was published in 2004. So it’s nearly 20 years ago and it was a defense of globalization. At that time, there were a lot of critics in the West. You might remember the WTO ministerial meeting in Seattle, it was a very famous event I think in either 1999 or 2000. So it was a defense of globalization. It was basically arguing that these people were saying, globalization is very bad for developing countries. It’s exploitive and we should stop it. It wasn’t about the developed countries so much.

And I said, well, actually the evidence is very clear. It’s very good for developing countries and China, of course, was the foremost example. I know China’s incredible growth and then over 20 years – the subsequent growth, clearly couldn’t have happened without what you refer to in China as the reform and opening up.


When I wrote this book, I said there are 2 drivers crudely. There’s technology and there’s policy. They do interact a bit. In the long-run technology is influenced by policy. But in the medium-run and the long-run centuries or at least many decades, its technology and policy. So let’s look at where we are on technology and where we are on policy technologies. The underlying potential given technological realities and policy as well – what governments do on technology is one bit of globalization has been to a substantial extent exhausted. Naturally it’s not a policy thing and one is just beginning. So the bit that is naturally exhausted is the unbundling of supply chains in goods across the world. That’s been going on now for quite a long time, we had pretty clear evidence that 10-12 years ago after the financial crisis, this was slowing. And I think the reason it was slowing was that an enormous part of the opportunities to unbundle physical supply chains had already been exploited. Some of the supply chains, which have been unbundled with China being part of it was actually moving into China, so it was becoming Chinese supply chains. And in addition, the enormous cost advantages that particularly China to a lesser degree and  Vietnam had in the 80s and 90s were diminishing because of a wonderful thing – wages were going up. So the result was that a completely natural cessation, a slowing of physical supply chains occurred and that won’t accelerate until there’s some huge new technological improvement.


The potential through transport links and links like the Internet and telecommunications links are not being transformed with one exception that we will come to in a moment in this regard. To give you an example, airplanes move basically about as fast now as they did 40 years ago. We’ve got huge container ships, but they are probably now about as big as they are ever going to get. Just look, what just happened in the Suez Canal. So basically the container. The container which is put on the container ships is a great invention, but is now 70 years old, roughly. So technologically, I think, the unbundling of the supply chains and the movement of goods may well have reached a natural plateau relative to our economy. It might continue a bit, but there’s another completely different potential which is what I think of as virtual globalization or the globalization of ideas, broadly defined.


What we’re doing now, what we have discovered in this crisis – it’s actually possible to operate highly interactively without being in the same place. And it’s obvious to me that will generate huge potential for interaction among human beings – economic interaction, cultural interaction, interaction in terms of ideas. And here relevant divisions are linguistic more than anything else and even that – with the advances of AI is going to diminish. I’m sure we will soon be in a world in which when we talk like this not with you of course I will talk in English and someone in China will speak in Mandarin and I will hear this translated perfectly by our AI and the Chinese person will hear it perfectly translated by AI and we’ll have a conversation. That may not be this decade, maybe the decade after but I think this will happen. So I think the virtual globalization has tremendous potential and I think it’s a wonderfully good thing and it will create great difficulties. Because I because it would be very difficult to isolate yourself from the world intellectually and culturally.


Now, I’m in favor of but it will create some challenges pretty obviously. Then there’s the policy. Here it’s pretty clear that we have become more suspicious of one another and that’s partly because of divergent political developments. I’m not going to talk about China, but I think it’s pretty clear and, in the West, clearly our societies have become more divided that was happening before the financial crisis with the financial crisis and now the pandemic has made that even bigger. It’s made people more suspicious of one another and politics more populist and more deeply divided. And when people really don’t like one another in a country, the one thing they can often agree on is that they dislike foreigners even more. So I’m afraid xenophobia, as we are human, we’re all the same – xenophobia brings people together and that can be true. I would suggest even in China and suddenly big time in the West. And that’s happening so politicians say it’s nothing to do with what’s going on in our country. It’s all their fault. Let’s say, like Mr. Trump says, it’s all the fault of the Chinese. And people will listen to this and we see this happening, not to the same degree in Europe, but it’s happening. that’s the first thing, of course.


Then, we are in the midst, objectively, of a massive power shift and let’s be completely realistic about it. Europeans and their colonial offshoot – the US is a colonial offshoot of Europe – let’s be clear, a very old one – they’ve been used to running the world for hundreds of years and they don’t like it changing and they don’t know what to do about it and I think it’s also true that China‘s not anyway worked out what it wants to do about its new position and this is creating tremendous politics – how do we run the world, when we no longer run it as it were? And that’s creating more ill will and this combination leads to a desire to protect yourself and to make himself more secure by reducing your alliance someone another by making sure that you remain a world leader in technologies, which is itself quite understandable and all that is getting in the way from a policy point of view of  globalization. You saw that in the trade war that Mr. Trump launched against China, which hasn’t gone away. You can see that in frictions of international relations, suspicion of each one another which comes out in rhetoric on both sides particularly of course in the US and that effects globalization because companies then say, naturally – OK, we’re in America now you’re running an American company well, my government looks as though it really doesn’t want me to be involved in China and if I have to choose, well, I’m an American company, I’ve got to do what my government wants. If I am seeing that sort of bit of a traitor to my country by providing technology in China and using technology, I could get in terrible trouble so these businesses start saying, we should go home. And then we have it. There will have lots of friction, which is quite normal. There is friction between companies and governments, and they say, well, maybe it’s not worthwhile – the future of globalization is uncertain. I’d better go home. And that’s happening – quite clearly happening and that happens, even if no policy is there, so the technology is opportunities, I think, I’ve gone in the way I’ve suggested or going in the way I’ve suggested. And the policy is reinforcing this so the globalization of goods and of supply chains is going to go very significantly into reverse, creating regional supply chains more obviously. Chinese-dominated or -run region,  Western-run region – how this will work out is very messy.



Then we have these overlays of the future of what I call virtual globalization, which is reinforced by the greatest technological development of our era, which is obviously, apart from vaccines, apart from bio-chemical and Artificial Intelligence, so it’s a very complex and very difficult and uncertain picture. I’m sorry it took so long.


Wang Huiyao: No no, it’s good to review that and look at what’s happened and reflect. I mean, you have a lot of statistics, charts and facts and you’ve been really catching the trend quite accurately.


What I think about globalization is that it has been going on for several decades intensively probably even during the last 100 years and as you said, when American overtook Europe, UK and now has been dominating for nearly 100 years, probably. But now it seems that as there is more globalization and the more we intertwined, we’re not building up more trust, there seems to be more distrust with each other. One of the things that’s interesting in your new book that is coming up, Crisis of Democratic Capitalism. Well, capitalism has been prevailing in the last several 100 years and has probably reached its peak already, but it does seem have a problem. For example, the wealth of the 1% of the wealthy in Wall Street is equal to the combined wealth of a huge population. And but then probably China is becoming a scapegoat for that. We see multinationals operating worldwide generating lots of profit. But they are not really benefiting the host country.


And that’s really where attacks and populism comes from and then China again has been put on the center for that. So is global governance falling behind global practice? Recently I noticed President Biden says, look we’re going to increase the lowest wage of the workers and also proposed a global flat tax and the EU and the US have digital tax issues. Are we doing some adjustment so that everybody plays a fair share and multinationals does its job, rather than China taking all the blame and then politician have self – fulfilling prophecy because they need Populism to carry their vote and to be bashing China to get elected. So what do you think about that – this kind of a dilemma that we are? Even during the pandemic crisis, the wealthiest, the 1% of US have seen their value gone up and the Wall Street stock hit an all-time high, but we should have a more equal and more inclusive growth, and that is something that can be done in that area. You are the expert, what’s your take on that?


Martin Wolf: I’m writing a book on this. It’s clearly going to be about 150,000 words in English, so this is a very large book of this kind, which I am frightened about and I feel that I’ve only touched the surface. The questions you pose are very deep ones. Just let’s start with the inequality issue. The statistics such as they are suggesting that there’s a pretty high level of inequality in China, too, but the big difference, of course, is pretty clear. Given the immense rate of growth in China- and I’ve seen some fairly detailed statistics done on this – everybody in China pretty well has benefited substantially from growth.


Wang Huiyao: And also lifting about 800 million people from extreme poverty.


Martin Wolf: Exactly, so 90- 95% of the population has benefited enormously so rising inequality matters less. Now in the West, and particularly in America, the rising inequality has coincided – and this is controversial and complex, and I won’t be able to go into all the statistics – but basically, we have a pretty flat real income growth for a very large part of the population and particularly the bottom half. And the reason for that is, you’ve got rising inequality of wealth and income. Income is in my view more important than wealth, but I won’t have time to go into that when overall productivity growth has been fairly slow. China’s productivity growth has been shooting ahead at 6-8% a year for decades, until relatively recently when it slowed since 2012. But in the West, it’s been much slower. And it’s been much slower for 2 main reasons. One, we don’t fully know, there’s not why on productivity growth being relatively slow in America and in the West in the last 40-50 years. This is a very big question which I won’t have time to go into, we’ll put that to one side. But the other reason is clearly are these are already relatively advanced countries so they can’t gain much from importing new technology from elsewhere. They have to develop within themselves. I’m one of the people who believe that the new technologies we’ve been developing, given the structure of our economy, which I can’t discuss in detail, but basically, with increasing domination of personal services – the sorts of services that you can’t easily automate in our economies – it’s been very difficult to increase productivity. I think that by that way, in the next 20 years, China will begin to suffer from the same problem as industry becomes a diminishing force in China and industry is always the second and a big sector, where productivity growth is fastest. You then end up with lots of other activities, which is more hospitals and schools and looking after all people, looking after you, where it’s really hard to raise productivity. So you end up with an economy with a huge service sector, a lot of it is quite stagnant productivity. That may change in future but that’s where we are now, so productivity growth has been slow, inequality is rising logically. That means a very large proportion of the population haven’t had improving incomes and that makes him very angry. And in societies with very diverse populations, this is created also very clear interethnic friction and that has allowed politicians to play on essentially in ethnic cultural war as part of their political strategy.


And that is what I think of as blaming the other “internally and also externally” because the others one that you can blame are foreigners. So the characteristic of right-wing populism, which has become so powerful, is that you blame domestic others and foreign others. What’s gone wrong, and you can see this very strikingly, of course, that’s what Donald Trump represented and it’s what the Republicans now represent, and you can see similar things, though not to the same degree in Europe, in Britain, and in European countries, in Italy and France, much less in Germany, but it’s there.


This is very important, however, it has a second huge consequence – the return of nationalism. But here I would like to suggest there is a fundamental moral underpinning of this, so here we got to get to the really deep conceptual fact, which is related to your question. The capitalist economy tends to be a global economy. It was true in the 19th century. Karl Marx wrote very well on this. I have a long quotation from Karl Marx in my book, very good on the mid-19th century capitalist economy. And the reason for this is very simple. If you are a capitalist so you’re in the market. There are opportunities globally, huge opportunities, that’s why Chinese entrepreneurs have gone global and American entrepreneurs went global and all the rest of it. So the world economy, the world capitalist economy is naturally cosmopolitan. That was Marx-based great insight. This is a cosmopolitan assessment of which in many ways, is a good thing and it’s an effective system for developing growth. The market orientation of the Chinese economy has been very successful to give one important example as Deng Xiaoping introduced.


But as the economy becomes more global, national control over the economy shrinks inevitably because the economy is more global, it’s not in your all control in the way used to be. And government is not global, government is national. Whatever the political system, they’re very divergentgovernment is national. International government rests on the cooperation. But that is essentially the voluntary cooperation of national governments, which have domestic legitimacy and domestic accountability. Be democratic or not, I mean, clearly, it’s no question, the Communist Party of China feels accountable to the Chinese people quite rightly, that’s their job, right?


So that then creates a permanent friction in a globalizing system between the logic of the economy, which is global, and not really deeply anchored nationally, but to some extent, it is and of course, the logic of politics, which is national. And accountabilities are national, and in a democracy, this is reflected in the election of people to power.


Who are really running against the global capitalists? The interesting thing about American politics is that the right and the left are both now running against the global capitalist very extraordinary. Now in this situation, of course, maintaining the international cooperation among governments needed to create the amount of global order, global governance, global rules in trade, in finance, in dealing with climate or whatever it may be. That’s very difficult because all the political forces upon them are national and are forcing them to pay most attention to their domestic citizens. And so it takes very wise and disciplined statecraft to say to people: we are looking after you, that’s what we’re trying to do. But cooperating globally is the best way for us to do this. We can adjust the way we cooperate globally, but actually we can’t close off economies that will impoverish us by agreeing to do things globally, we will actually be able to do better for you here at home.


Now that is the line I would take of course, but it’s not a line that it’s easy to sell. It’s very sophisticated and rather complex and it looks as though you’re abandoning national sovereignty. So, particularly when people are frightened and angry, when there are these huge power shifts, the result is, it’s very difficult to make that sort of sophisticated argument that I’ve just made that the best way to achieve domestic games is through international economic integration and cooperation. That’s where we are. Now I think Biden very clearly understands this better than Trump. Nobody understood it less than Trump, really almost impossible to do this but even he knows he has to satisfy domestic constituencies. The immensely striking thing is the richest people in America have the lowest tax rate. That’s the reality, they have the lowest tax rate. And the way he has to deal with that is to make sure they pay taxes and to do that. He has to deepen cooperation, which is what he’s trying to do on corporation tax and things like that, so the route through better domestic policy goes through better global policy, and this is a very sophisticated game, which is quite difficult to sell.


And in terms of relations with China as a superpower with a very different political system, it’s particularly difficult to sell, so one of the things that I think is happening on with what you might broadly described the somewhat populists left in the West is, it’s becoming alliance-oriented, not global. You can say it’s Western alliance-oriented, so it’s fragmenting the world, but not into countries, but into alliance systems, which is also very dangerous by the way, but that’s where it seems to go. It’s a halfway house between purely national economic sovereignty, and globalization that seems to me in the way it is now going. And obviously perfectly understandably, China, meanwhile, which is to establish itself as an advanced technology power by developing enormous strength in the technologies that the West has historically dominated, and Westerners, quite a lot of Westerners regard this as threatening.


So it has become very, very difficult to balance national politics with global cooperation, economic and security politics and that’s where we are now. And I don’t know what Graham Allison said to you, but the most obvious period, which had some echoes of this, is the period when the West dominated, of course in the late 19thand early 20th centuries, and that led to a complete breakdown of the world system.


Wang Huiyao: Thank you, Martin. I think you’re right. You analyze this, of course, in-depth on global governance falling behind global company practice you wrote in your book, Crisis of Democratic Capitalism, in which you said capitalism is global, and that democracy is local, and that’s a very good summary. So if we have this kind of contradictory on both sides as capitalism is really running around the world and benefiting all the top elites whereas democracy is local, there is a lack of equal opportunity it is constantly generating all those local politicians who are bashing globalization and global capitalism. So I think you’re absolutely right, so that the solution for that is, first of all, that international corporation will still need to be enhanced on the pandemic fighting or climate change. Let’s build up some trust. Otherwise, we’re going to be driven far apart by these ideological and value differences, right?


I remembered when you first came to China in 1993. You stayed in the Shanghai Peace Hotel where across the River you could see Pudong and now, one can see how that has gradually changed in the last several decades. So actually we just had the population census data coming out yesterday and you can see China has 1.41 billion people now and still growing a little bit. But the number of people that have a college degree is almost 220 million now, it’s enormous, the largest well-trained population in the world now. And the younger population between below the 14-year-old is still quite a lot, 17% and then of course, one of the problems that the number of people of above 60-year-old is getting higher and but the medium age is about 38 – which is still younger than that of many Western countries. So we have to see the difference.


I was talking to Graham Allison, Joseph Nye and Thomas Friedman, no one agreed on the idea of a new cold war. We already know it’s a bad analogy and then we are already intertwined. The problem I think, is, now, why is global governance falling behind local politics which is stronger than and global politics? The other thing is that of course, can we recognize the peaceful rise of China? That is something that nobody will deny if they come to China, the transformation going now is beyond recognition in the last 4 decades since Deng Xiaoping opened up China.


And now China is contributing one third of the global GDP growth. It’s the largest trading nation with  130 countries. It’s actually the top category of a producer of over 200 products classified by the United Nations and so on.


So why can’t the world have a different view on China and maybe have a peaceful competition like the Olympics game, rather than really thinking that only one model is the best. If China doesn’t converge, then let’s really place them as a rival number one. There could be some rivalries, but both Joseph Nye and Graham said, it is cooperative rivalry or be rivalry partners, using their words. So can we really reach that kind of trend in the future rather than self-reinforcing each other for conflict. How would you advise that from your assessment?



Martin Wolf: OK so this is such a huge question. I think one of the questions that I’ve been thinking about is, let us suppose, if China were to have a political system like ours. Would we feel differently about it? And it’s a very interesting question because it’s quite possible that the answer is no. That is to say, though, I don’t think it is fully a simple no. Such an enormous shift in the balance of global power, which you described very well, creates uncertainty and fear everywhere else. And that’s what the Thucydides’ trap is about, and that would happen even if there were not absolutely no ideological elements in it at all.



But of course, there’s also history, so I’ve always assumed that some substantial degree of friction was inevitable, and we just have to accept that we do have national-based global politics. The question is, are there any analogies from the past that help us to think about this?


I agree with you completely the Cold War is a hopeless analogy, because it was a pure ideological competition. We had almost no economic relations between the West and the Soviet Union. They were almost completely independent entities, and the Soviet Union was not really at any stage. It was a military rival no question, but not an economic one. So this is not a useful model. We are enormously economically integrated with China. China is a huge economic power and will become a bigger one, and we also share a world which we now see, we have to look after together. So that makes managed cooperation simply the only way we can possibly do this. Of course, the one thing we do share with the Cold War period, which must be evident that war is unthinkable, war has been unthinkable since the invention of the nuclear weapon.


So it just has to be put outside any thought on the possibility of actual war between superpowers. So, how does cooperation work? I think you have to breakdown the elements in it in a pragmatic way. There are the global commons. And that have to be separated, they can’t all be dealt with together and they must be dealt with pragmatically. The global commons – climate, the oceans, the protection of species are all big issues here in which China will be centrally involved and we’ll have to do a lot. And I think China will have to do a lot more than it’s now planning in all these areas, and that will be quite tough for China as well as for us, of course. And that so that’s a huge challenge, but that is in China’s interest, too, so I think there’s hope. Then there are managing security relations in such a way that they are stable, so everybody understands what their fundamental interests are and manage the system without friction. It’s absolutely crucial. And I don’t think it’s happening enough.


Then there’s economics. And here I believe the West has legitimate concerns with Chinese behavior and I’m sure China has legitimate concerns with Western behavior. My own view is one, both sides need to define what they regard as their absolutely core security interests in technology, which are legitimate, and they have to say, these sectors are ones we are going to make sure a nationally independent, and we will agree that, and that will have impact for trade, and we just accept that it’s pretty clear that’s going to happen. There are core technologies both sides want to control for their own sake, fine, everything else should be conducted, according to normal rules of trade. But they have to be reciprocal and equal. I think the way Trump went around about this was mad, but there is a case for a profound negotiation between China and major powers on a new trade order, a new trade system with new rules which are more legitimate and work better. Some of them will be tighter and some of them will be looser. They will be different. I think that is now required we can’t go on as we been and pretend the WTO system and the 2001 China accession is still the last word on this relationship, so that has to be done and then we have immensely important areas where we need to cooperate like health, development, debt, which is a big problem, China is a big creditor, we are big creditors, where there just have to be active day-to-day cooperation that will require considerable changes in international economic and organizations. It’s a tremendous agenda and it won’t do I think anymore just to go back to where we were 15 years ago. We have to think of it forward and that will require immensely imaginative states craft in the West and in China, and that’s the agenda.


Peaceful co-existence between China and the West


Wang Huiyao: Yes, great, I think that you give a lot of deep thinking on that. I was always wondering, the peaceful rise of China is a blessing to the world. Maybe when we look at the development of the last 100 years or 50 years of globalization and development, we’re seeing the technology development has hugely transformed the international business and environment. We see all the modern things have really gone beyond the recognition so we cannot be used the old way of measurement. It looks like some were still using the 20th– century measurement or the 21st-century reality, particularly with China.


For example, China, with its 5000-year history should  restore its rightful place and has its own logic. The respect of seniority there’s always a strong central government due to large irrigation and a huge population and things like that. China also has some kind of a collective spirit where they have showed to be greatly effective during the pandemic fighting, sacrificing a little bit of human freedom. We saw that in the culture of oriental East Asian culture, even Japan is always ruled by one party, albeit briefly by Social Democrat. And then Singapore, looking at those Asian cultures. I’m thinking Chinese System works for China very well and lifted 800 million people out of poverty. Larry Summers said that is something comparable to the Industrial revolution of the British Empire in the last several hundred years. Further, Chinese economy now is a hybrid. There is a right balance – 60% is the private sector, 20% is multinationals and another 20% is also owned by the public. So it’s really easy to do infrastructure and government plays a bigger role in terms of infrastructure. China has 1 billion smartphone users and 1. 3 billion people covered with some kind of Medicare – the largest Medicare coverage in the world. One billion has been covered by the social security of some sort.


So what went wrong? Can we have a new system, a compatible one? Fukuyama saw the end of history, but I’ve been using the Joseph Nye’s words, maybe in 2035, we will see China getting gradually be accepted and maybe we see better relations then, so this is very agonizing process. How can China do better to explain China itself to the world? Also the narratives that we hope to be shaping is to have a better understanding communication. We’re living in a world of democracy as well. The largest opposition party is United States, probably EU as well. China is watched by thousands of media social networks. China has this kind of consultative democracy that all the elites get together. The 14th 5-Year plan had a 1, 000, 000 comments and the revisions and suggestions are throughout country. So it’s kind of a different democratic process. Can this kind of new system be accepted or peacefully coexisted with the rest of the world? China lifted 800 million people out of poverty. Just imagine 10% of them become refugee. 2 million of refugees from Syria have already distorted the whole Europe. If 10% of China become refugees, they will flood the world. So can we live with a peaceful China? And how can China do better?



Martin Wolf: That’s an enormous set of questions. I think that I could respond to this in 2 different ways, one which is my personal views on China. It’s the evolution of its system. And the other is to look at this as it were as a human being from Mars, which obviously I’m not. And to say, how might you be able to resolve this. As I’ve been implying, an enormous amount of this, at least 50%, possibly, two-thirds are just about relative power. And power matters to people. Surely, I don’t have to explain that to a Chinese person, I know the Chinese Empire was a power structure, it is always has been, and I think perfectly from the Chinese point of view, the restoration of normal power relations, from your point of view, is perfectly understandable and reasonable. But from the Western point of view, particularly US point of view, this is a transformation of power relations downwards. People don’t like becoming relatively weaker. Because it constrains your freedom of action that’s what power means. Power is the ability to do what you like. Becoming relatively weaker means you can do less of what you would like, or it becomes costlier in some way. And people don’t like that. That’s what politics have always been about in all systems, it’s about power. So we are in the middle of a huge shift in relative power. And the people who are at the wrong end of this shift don’t like it and that’s what the Thucydides’ trap is about. Let us suppose the Chinese system today were just like ours – obviously, ridiculous – but would we still have these resentments? And the answer is yeah, we would have a lot of these resentments, at least 50%. So this wouldn’t be resolved by any of the issues that you mentioned. Explaining China to the world wouldn’t resolve any of that because the power shift is real. And the power shift is of course, associated with the great success and lifting 800 million people out of poverty is why China is now a huge power and will become more so. So there’s the power thing. Power relations can only be managed, and power relations have to be managed through systems that generate trust. This is absolutely central, and systems develop trust by acting in ways on both sides that give confidence in one another. A lot of things have happened on both sides, which have undermined it. It’s just a reality. I can go through the list. You know the list. That’s just how it is. And these would be mistakes made by us and mistakes, in my view, made by China, quite big ones. So that’s the first sign.


Then there’s the governance issue. And then I’ll come to the economics one. China is historically as you rightly say a distinct civilization. It is in fact, the heart of a distinct East Asian civilization, which is very old. And the countries you mentioned Japan, Korea, obviously Singapore for different reasons are all part of that Chinese system of ideas. And they are very different from the Western tradition. And I could just talk about that for a long time because it’s been a huge interest of me. But most people don’t know, long before I became an economist, I spent years studying the ancient European, Ancient Greek and ancient Latin and so I know something about the history of Western culture, and I’ve always been very interested in Chinese philosophy and the differences and also India by the way. so you have these very different civilizations. So it was always likely that China would become a very different sort of political system from anything in the West and that would never be a liberal democracy in our sense. It was perfectly clear. That was very unlikely to happen, which is not itself a problem as long as you can do business with it, which means that it’s predictable. The particular form it’s taken in China is to a Western – and I’ve made this point somewhat puzzling – because to us, communism is a Western philosophy and one we haven’t accepted so that’s quite strange. But the core of it is clearly that we can understand that’s fundamentally different. Because of that, China operates in ways that we find very difficult to accept on quite important issues. And the same is true on us for Chinese people. You’ve emphasized for instance, our indifference in many countries particularly in US to rising inequality without doing anything about it. That’s crazy, isn’t it? So we have to live with difference. We have to live with profound difference while managing the power relations. That’s very tricky if things happen with either side regard as fundamentally unacceptable. I don’t think explaining yourselves would help much here. I don’t think Westerners fundamentally misunderstand what China is. Some do, obviously lots do, but reasonably well-informed Westerners understand what China is. They just can’t really accept that there is another way of being modern. It’s just doesn’t fit in with the universalism, which is so characteristically Western thinking. Westerners are universalist. This goes back a long way, I could go into that the final.


A final point is we have all these economic relations and as I said, the way to resolve these is to separate out core security questions. Because in a world of power, security matters from everything else. And that’s difficult and I think it can be done to some extent by mutual agreement. But we have to define what we regard as vital national interests and what we don’t and deal with them in the economic sphere. So my approach to this will be slightly different from yours. I think there’s going to be a real problem in ever reaching a world in which everybody likes one another. The truth is, we live in our countries with people we don’t like very much. That’s quite normal. Problems of this kind have to be managed pragmatically. They’re not going to be managed by everybody saying. ‘Well actually, we really all like one another. It would help as I once said if we were invaded by people from Mars. But we’re not going to be invaded by people from Mars. So we have a lot of interest in common, a lot of values that we do share. And we have to build on those to manage a very long-term future which will be complicated. And certainly explaining each other to one another would be sensible. But accepting difference and managing it what this is about. This will be more difficult for the Western than for China. And in some areas, it will create very severe friction, but I think it’s manageable. And that seems to me the mature way to handle this. Nobody’s going to win. It’s impossible for one side to win. So the only way to deal with this is to manage it.


“We mustn’t decouple.”


Wang Huiyao: Thanks Martin, you have quite objective analysis of the situation. I think that in your new book, capitalism is global, and the democracy is local. Have we reached some kind of a stage that even democracy, a concept that has been originated i2000 years ago by Greek philosophies, maybe with modern technology and huge population, it’s now different? When the democracy concept was born there was probably the whole world probably less than hundred million people. Now it’s 7. 5 billion. Should we upgrade that notion? Because there could be a different format. That “one man one vote” maybe works in the individual-centered society. Was this consultative democracy meritocracy also wo?Just imagine a government official in China, if he’s going to be promoted to be a ministe or governor, he has to do 2 years at a grassroots area, then at the county level, the municipality level, the provincial level, the central government level, and finally at the parliament or central standing Committee.There was many ranks and there was thousand years of mandarin system in China that has been selecting through merits by that process. So now just imagine there’s over 200 million college graduates in China now, accounting 15% of the whole China population. That talent selection is a public new format. And again, technology – 1 billion smartphone users, every day are using smartphone to vote – where to buy, where to shop, where to go, what job to take, which newspaper to read. They have a lot of choices. And also human rights concept has to be upgraded as well, and we look at this pandemic fighting is a good example. People in the West don’t want to be locked down and it’s violating their human right while Chinese accepted that. China now is the freest country in the world in terms of how they spend their holidays. The boom of millions of people travelling around for the domestic tourism boom is unprecedented. So I’m just thinking of this technology democracy, market democracy and all those things combined. Chinese is experimenting with some new models meritocracy and just imagine the synergy that China has – everywhere you go it’s a few hours by high-speed train and then 5 G. There’s about 800, 000 stations on 5G and 4.5 million 4G stations. And Artificial Intelligence and big data etc.. You are absolutely right on comparing this with Mars – if we attacked by Mars. We’re all human beings, we should help each other. I was really surprised to see as we’re fighting pandemic, big countries don’t talk to each other, big countries even now are busy forming a set of allies against a country but not to set up allies against the virus that’s really sad to see. 


So I’m just thinking… of course China needs to do better on explaining itself, maybe being more open more for foreign  journalists to come, having more international tourists and welcoming more foreign students. China is willing to learn from other countries. Since China opened up there’s 7 million Chinese students study around the world but only less than a million foreign students come to China. So I think there’s a lot of things that we could do better among each other. For example, if China doesn’t converge or you are not one of us, you are the other Aliens, we’re going to bash you – can we avoid that?


Martin Wolf: You’ve raised so many different issues. OK, I have the following sorts of reactions. First, there’re general genuine conflicts of interest. The South China Sea is a conflict of interest. You might say you have one point of view. We have another point of view. That’s just a straight conflict of interest has to be managed. Then there are conflicts of values as you’ve said. That in the end we will converge if we’re sensible on Chinese values, but we’re not going to. And the fundamental assumptions that underpin contemporary Western culture are very deeply rooted in our history, probably not 5,000 years, but let’s say 2,500. There are essentially a marriage of Greek, ancient Greek and Judeo Christian and the Jewish part of it goes back, probably 3,500 years. These are not going to change. So our culture for a whole host of reasons is more individualistic, more law-based and less bureaucracy-based. And though we have converged on in very important ways. We developed bureaucracies in important ways in imitation of China. It’s not an accident that we call our top bureaucrats in Britain Mandarins. That’s what we call them. that’s not an accident. Of course, our bureaucracies mostly originated actually with the church bureaucracy. The Catholic Church’s influence on Western history can never be exaggerated. I don’t want to go into all this, I could go on forever. But democracy has proved representative government, which is modeled by the way it’s a British invention. Democracy has always proved very adaptable and flexible we’ve been mainly been able to import bureaucracy into it, which is quite meritocratic. So we have a mixture of meritocratic bureaucratic and representative elements in our constitution with these enormous roles for the law. It’s a composite civilization and it should not be simplified and some of it is very close to China and some of it’s very, very different. It will evolve, it has always evolved, and has to evolve now because it’s in terrible trouble. Just as 200 years ago, your old imperial system was in terrible trouble and had to collapse to create a new Chinese system. What you have in China today is clearly rooted in the Chinese parts, but it’s a new Chinese system. And that may well happen to us, but it will happen internally. What happened is a result of internal and external pressures. And I think in the meantime, at least the next half century or so, we have to live with rather different assumptions about how things will work, and we will see who overall does better. And it seems to me, looking at it, China does something incredibly well, above all – anything that involves mass mobilization of resources, China’s system is staggering. And there are things we do rather well.


And there are things we do rather well, in terms of ideas, in terms of creativity, in terms of flexibility, the things we do well. And I think from the human point of view, it would be good if both civilizations function and develop and we learn from one another. I think historically we learn from China, we learned about government from China. this is largely forgotten.  Obviously, China’s lamp from the West in the last century is in the period of the communist rule. But we have to accept that we’re going to remain different, that creates really big interface problems in important areas and they’re not trivial. Once you mentioned human rights, these are sort of core things for Westerners and them ae going to go on. Maybe they shouldn’t be, but they are. Where do human rights come from in the western tradition? It comes on from the fundamental idea that every individual is a spark of God, every individual matters to God and they matter as individuals to God. You can’t take God out of the West. We’ve tried quite hard, but it’s still there in one form or the other. So you just have to accept that will go on, individualism will go on and human rights. That means a system which is based on the idea of collective rights, and collective responsibilities like yours will interface badly. You want to innovate and develop technology to the highest possible degree. We don’t want to be dependent entirely on Chinese technology. We think that will be rather concerning. So that means our governments are going to become more active, become more like yours that spend more money on building our own technologies and developing and protecting them. And in this respect, I think, Biden is doing interestingly. I think Biden thinks that what he’s doing is what the Chinese did, that’s why spending all this money. So we’re learning from you and states spend lots of money now. The American state basically created the railroad system and highway system that linked together. Then, for 40 years, they forgot all about it and now we’re learning. This is important. We’re becoming like you so we’ll learn from one another and we will remain different from one another, and there will be friction because you have attitudes to things that are happening in Hong Kong. Whatever it might be which we don’t share, we cannot live in this world together if we expect everybody to agree. It may be possible within the company, but it won’t happen and living with difference is possible as long as you realize what you share as human beings and the planet which is very fragile, and peace, which is very important to everybody. As you said that one thing you get out of this crisis is Chinese government cares about the lives of Chinese people, and we care about the lives of our people. We did it rather badly, but we’ve learned. We’re not going to do this make these mistakes again. We now understand what a pandemic is, we won’t do those mistakes again. We will learn and then we’ve got to learn to live with one another. That’s the great task. In the end we will say these people are different for us, but we’re still human. We can learn a lot from one another, and we can share ideas as we’ve done today. I’ve enjoyed it enormously and I hope you have to.


Wang Huiyao: Yes, thank you. You’re so open-minded and then you actually mentioned about we can learn from each other. Absolutely in China there’s always the signs of democracy. The first movement is about 100 years ago, China was learning from the West, and later opening-up is largely open to the West. What Deng Xiaoping said on December 1978 during the Third Plenary Session of the 11th Central Committee was making an agenda for the start of the diplomatic ties with US. Our dialogue is really fascinated. We had about 1 million viewers. And you recently wrote an article “China is wrong to think the US faces inevitable decline”. The article is widely read in China. You summarized all the competitive strengths of the US – the best universities or venture capitals and corporate multinationals. One of the things I think you were doing very well is mentioning Western countries are attracting global talent. Lee Kuan Yew, Former Prime Minister of Singapore said China is picking talents from 1.3 billion people, but US is picking talents from 7 billion people, that’s probably one of the advantages that US has. So if US is doing well from zero to one, China has these 1.4 billion populations that China is doing well from one to 10, 1 to 100.


But we have our competitive advantages. The population dividend of China will continue for some year. Also China is doing well on other things, according to the global innovation index, China hosts 17 of the top science technology companies, with Guangdong-Hong Kong-Macao Greater Bay Area, Beijing. Also China has now for the first time surpassed the US as the country with the largest number of patents applications in terms of intellectual property rights. And also Chinese universities are catching up. So if US is doing well on global multinationals and China is doing great on this market, you just imagine, it has already had a 400 million people middle class. In the next 10 to 15 years, we may have 600-800 million people middle class. It’s great for the world. Let’s all benefit from each other rather than we complain that we have a different system.


Martin Wolf: We can’t decouple, that’s clear, and we mustn’t decouple. I think having deep economic relations is a good thing for both, because it makes us more prosperous, it gives us strong mutual interest in one another’s fate. And it also leads to exchanges of ideas, knowledge and understanding, all these are very important.


But I also think that the reality of the relations among states is always one of power. Kissinger, who after all, is one of the great individuals, always talks about the balance of power. And I think we are going to need to maintain a stable balance of power, because when it starts being destabilized that possibilities of conflict arise. And one aspect of power is obviously technological. I do expect an ongoing technological rivalry but how that should workout is important. I don’t want to get into the details of “do I think the western attitude to Huawei made any sense?”, as far as I can see is I don’t. But it seems to be obvious that Western powers above US are going to try and maintain technological autonomy in certain areas which they regard as central to their security. That’s normal and can be perfectly well managed within a world which is open. In all other respects, I think there should be movement of people. I think this will no doubt be regarded as offensive and I understand the sensitivities on China side, but I think that in terms of information flows, we’re going to have to tighten up on what is allowed on our Internet. And I think you’re going to have to loosen what is allowed on your Internet. So we are more even in that regard, we obviously have allowed the internet to become perfect media for the dissemination of lies and this is unbelievably dangerous for our stability. I won’t go back into the question of what democracy means now because that would take half an hour. I have you written a book on it. But I think at the same time that the level of censorship in your system has to decline. And the openness to the world in terms of knowing what’s going on, journalism is very important that has to be maintained on both sides. Even if you don’t like it, allow it to report. And the same applies to Chinese journalists in the West. We need to be open to one another in that fundamental respect. So I believe that in these rivalries we need to be realistic and perfectly well managed if you like cooperative rivalry. In such way that everybody benefits. But the situation is not what it was 30 years ago. The other side of this is China is now a superpower and rising one, and China will have to say to itself “What sort of world do we want? How do we feel about the institutions of the world order? How do we interact with them? How do we want to shape them? How can we do that in ways that give other powers a sense of security and to fit in with our system?”. This is a completely new challenge, the challenge for the West is obvious as we discussed. There’s also a huge challenge for China in this sense. Historically China was the largest for at least 2 to 3 thousand years, China was the biggest and richest place in the world, but it was because of the technology at the time, it was largely isolated from the rest of the world, and its neighbors were much smaller. So this is the first time in Chinese history that China is a great power within the world as a whole. China is 1. 4 billion people, but the world has about 8 billion. And it has other powers and other interests, so China for the first time in the history is a great power, fully restored, operating within a global system that it cannot dominate. It’s also true of the West and US. The West has been so used to dominating, now they find it’s almost impossible to get used to the idea. But I think the same problem in a different way arise with China. So there is a way in which China has to think through, “we did incredibly well. And rose to this immense stature in a world which institutions were Western largely and in which the West thought it was dominant”. That period is over. We don’t accept that anymore. It’s fine, but how do we fit into this world? We are different, we have different political systems and orders. Everyone is different. We’re all different.


So how do we make a reasonable order from our point of view in this? Do we wish to merely to maintain the autonomy of the Chinese state? Do we want to create a large number of tribute states around us? How do we relate to the other great powers? What is a sensible way of doing this? I think there’s a lot of thinking on the peaceful rise, the peaceful rise happened. Of course, China has a long way to go. It’s still relatively poor. It needs a lot of development. But China is now a leading power, a major power. I was merely trying to point out that the US is not yet finished. That’s all. So I think there’s a big challenge for China too in working out Where does China fit into this world? How does it want the world to be ordered?” So take one specific example, we’ve gone through many. It is pretty obvious that the World Trade Organization now doesn’t really work. We haven’t had a successful global negotiation since 1995. Not really, except the Chinese accession. The WTO is not able to handle the US-China conflict, that’s obvious, that’s why they went out of it. Does China want a new system? What would it look like? Does China think it will be OK if the system collapse? So I’ve been giving speeches in China. Every time I  come to the China Development Forum. I think the first speech I ever gave there was in 2010 and I said, “What is your Chinese view as a leader of the world trading system? What is China’s view on the future of the trading system?” I asked and I think that’s a question that is still no answer. By the way I think the same is true in the monetary system, though your previous PBOC Governor talked about that. So I want China to be a leader. I want China to come forward with its ideas on how this new world is to run. I think that will be very challenging. It won’t be the way it was in 2005. But I agree with you completely we need to have working relations, cooperative relations, despite immense differences and frictions which will never go, like differences on human rights, they’re not going to go. And I would be very grateful for strong Chinese positions in the world on how you want to take this forward. I think China is a big point, but we want more leadership from China. And we will probably disagree violently but will disagree about real things. Thats fine, I don’t have any problem with that as long as it’s peaceful and it’s ultimately aimed at managing relations.


China and the West should be more active in cooperating on international governance


Wang Huiyao: Great, I agree with that China should be more actively on international things. Of course, now the international order is really made by US, like Bretton Woods system, the English-speaking system, the international  law system. It takes time, but I agree China should do more. Recently the WTO Director-General announced that there are 4 deputy WTO Director-Generals that have been appointed and one of them is from China, Zhang Xiangchen, former vice minister of Commerce is the new deputy director of WTO. We need to learn more from Western countries, how to be more active internationally.


There is a media question which is about the international order –“just like the magazine of a Politico said in 2020, the old-world order is already dead or gone, maybe countries lose their trust between each other and there’s also a backlash against globalization and in the future international economic order”. The question is, for example, China has one experiment – the Asian Infrastructure Investment Bank – China has actually taken initiatives and there’re 104 countries participating. This is the largest multilateral successful organization, India is the largest recipient of the AIIB loans. I know that President Biden also now proposed 2.3 trillion USD on infrastructure. So infrastructure could be one of the biggest cause for the world in the next several decades, and China has the leading development capacity, but work with Western countries financially, technologically coupled with multinational legal advice and engineering consultants from Western Countries. Maybe we could work together. Can we have a global infrastructure investment bank, so US and China can create a large pie and work together?


For a new Bretton Woods moment, international climate change could be something to glue us together and the pandemic fighting, too. So we need to find more common tasks or challenges that we will work together as human beings. So what do you think about that on a new global order how we can really shape a new one?



Martin Wolf: I think having common tasks, shared tasks, which is very important and. I think that one of the best ways of managing this relationship is to through these tasks and you’ve mentioned some very, very important ones. I. I think the AIIB is a great success. It’s been with an exceptional governance system. And creating institutions like that is excellent.


In each of these areas that you mentioned – climate, infrastructure and pandemic. there are clearly possibilities, very important possibilities. There are also some really pretty big problems in all these areas, perhaps because we haven’t talked enough to one another. On the infrastructure side for example. Obviously, the core of this at the moment is the BRI. And there’s been very little Western involvement in this and there’s a lot of Western Suspicion.

Suspicion about its geopolitical purpose and suspicion about the terms of the debts and the debt problems that have arisen out of it. By the way let me make it clear I’m not blaming China on this but I’m just saying this is the fact. The BRI can be could be seen as a power play by China or as a step by China to participate in the global future by using its enormous strengths and I think the way that those doubts can be resolved is by opening up to discussion and the way the BRI works there are some big issues by the way there’s some injecting issues. it’s clearly debt problems that have arisen and that leads to a second question which has become a very big one. I’ve been involved in discussions this in the last couple of years through 3 years, which is China is a very important creditor in the world now. Which is great success. And, of course, we are now going to move into a world in which we’re going to have a lot of bad debt after the pandemic. So one of the questions is how are we going to negotiate all this? And how is bad debt going to be negotiated? Let’s suppose you’ve got a country that owes a lot to the Bretton Woods institutions a lot to Western private interests. A lot of Western governments, and they owe a lot to Chinese companies and the Chinese government. In this situation negotiating that is virtually impossible. Because nobody will want to reduce their debt. Because they will say this is I’m going to pay the price and the other creditors will do get their money back. That’s not fair.

And historically those situations have always made it impossible to renegotiate that at all. Because nobody wants to go first. So we are going to have to create or recreate new, and do expand debt forum for all major debtors and creditors include all including China, China will obviously want a powerful voice in this. But if you think about the Paris Club. You think of the future, which I believe is that sovereign debt restructuring mechanism – we need a global one. The Chinese one is going to be a very, very big area where concrete cooperation is going to require multilateralism.


Trade we discussed and I hope that the new deputy director general of the WTO can put forward ideas on how this system can evolve. It’s going to be a very big challenge now. I think on how to do it. I wish the new director general might know well every success.


But again in all these areas it’s partly China comes forward with a global view and the West has to accept China as a legitimate partner. At the moment I think neither is happening. These are completely separate discussions and that makes it much more difficult to manage things now. Then, if you look at the pandemic. The WHO is too weak, it needs to be a much stronger into global institution. It lost a lot of legitimacy in early period in the West partly because of our mistakes, and partly because of theirs. But it should be obvious we need a much stronger global WHO. And that means every country has to cooperate. It needs far more resources it needs the ability to coordinate vaccine development, research into disease just to get rid of some old scourges, we’re close to getting rid of malaria, think of that incredible achievement. We will do that much better together. But for that to happen. The West and China have to agree on a new program for the WHO, new resources, new governance, which makes it credible to both sides and that’s not the situation now.


Climate – the West is moving towards accelerated carbon reduction in this. It needs to be accelerated much more. But I think China is going to have to offer to do more substantially more. It’s inevitable given that it’s the world’s largest emitter by far and it emits so much coal. So there’s going to have to be a round of negotiations in which both sides. Both sides give a lot. Otherwise, the plan is going to fry. At the moment, we’re not going to resolve these problems, so there is a whole range of concrete specific global challenges, to which solutions will only arrive with very deep cooperation and at the moment. I’m not going to say whose fault that is so that it’s not really happening. Will it happen? I don’t know. it’s very difficult.


The relations in the US and China at the moment, pretty clearly from the meeting, they had up in Alaska, it was pretty bad. But in the future, both sides are going to have to give. That’s the really, both sides are gonna have to give including China. That’s where we are. I think it’s crucial to understand and I think it’s the one thing on which we completely agree is that where we are now is not very satisfactory and it’s getting worse and it’s getting worse quite quickly.


Wang Huiyao: I agree with you, actually you partly answered the second media outlet that China Radio International (CRI) raised on the Belt and Road question. Probably we could multiply belt and road and maybe join the Paris Club and make it more transparent and have collective interests. So you know we’re lacking a big global initiative. AIIB could be upgraded to global infrastructure bank, then maybe combine that with belt and road modernization – one possibility? The improvement of WHO improvement and enhancement of WTO and all those things need to be strengthened and so does the global governance system.


Frictions between powers are manageable for the good of humankind


Wang Huiyao: There’s another question from China Business Network (Yicai) about the EU cooperation with Biden – the EU-US relation. Also there’s the EU-China-Relation – China has a comprehensive investment treaty between EU and China and EU now has had a little challenge ideologically value-wise and is using more lean towards US, but economically all those big European companies are having big headways in China, which are more profitable in China than their own countries. Also UK-China – Boris Johnson said “global Britain”- I mean as the UK left the EU and is looking beyond it, maybe it should look to far East to China economically.


Martin Wolf: I think the way things are evolving at the moment. Europe has economic relations with both sides US and China and would like to preserve good relations with both. I think it’s generally the case. That’s point 1.


And point 2, ever since the Second World War, Europe’s security has been guaranteed by the Americans and that has not changed and relations with security issues have become more important, particularly because of a severe Russia. Then again that may be right or wrong, but that’s how it’s perceived. So the security relationship is very important. So if the relations between US and China get worse, Europe will be pulled towards the US. It’s just inevitable. How far they will be pulled depends on how relations in the US and China are unfold and how potentially damaging the economic evolution will be, which is not clear.


So this is uncertain but I would add finally that while you’re absolutely right Europeans are having a huge interest in China. There is also a lot of stress in European business about their relations with and operations in China on intellectual property issues and on equal treatment issues. And indeed, whether they will be allowed in the long-run really to prosper in China. You just talked to Western businesses. They all have lots of questions about how viable this is. Not all to the same degree, some are much more successful than others, but a lot of them are really quite anxious about it. So both US and European businesses are very split now in their relations with China. Some are still wildly enthusiastic and feel there’s a tremendous potential in others much less so and that has shown up in the politics of this. So one of the things I think China has to ask itself. Are we treating Western businesses in a way that makes them feel they really have a deep stake in the future of China, to have a productive and profitable stake? And I would say I don’t do business so I’m just reporting that the views of Western businesses on this are very mixed. So one of the priorities for China if they want to do what you say to prevent a Western Alliance against it economically is to ask well, are we handling this as we possibly could, are we persuading Western businesses that they have a profitable safe secure protected future, protected as far as intellectual property in China? And if not, what can we do about it? And I think the answer is it only in part to people feel this confidence. So there’s a geopolitical element. The Western Security Alliance – there’s an economic element and a number of Western leaders think that the Economic relation is not as good as they would like. So that has to be dealt with from China’s point of view as there’s just as much concern on the Chinese part.


This is very complicated. But at the moment, where will Europe go? If America is led by somebody like Biden, they will go with the Americans but of course, Biden’s future is quite uncertain, and if it’s trump or like Trump, it’s completely different. We’ve got a crisis in the West. Obviously, there’s a crisis in the West and that will be obvious to every Chinese person who thinks about it and obviously that shapes the options that China will have but again, let me stress the really big point – China’s absences. I’m addressing Chinese audience – I would say quite different things when addressing Western audience and Chinese audience. China needs to convince people around the world, to the Western countries that it is a completely open fair equal reliable partner, and it is true to a very substantial degree, but in my view, not enough and this is more important now than it was 20 years ago because China is so much more important itself.


China and the UK and you have any word on that, in the UK, I can’t predict the UK. Everything I said about Europe is even more – the UK is gone sort of crazy, from my point of view, to be against Brexit. But again, I think the view that the UK had in 5 years ago, has changed, because the divisions between the Western world. The bubble that the US and China been growing – the UK now feels it can’t have both equally. That’s the problem people are beginning to feel all over the world, we have to make a choice. Now, some countries are clearly going to choose one way or the other. Obviously because it’s overwhelming. For Britain, the simple truth is that our relations with the United States – across the whole board, political, strategic, economic, cultural linguistic relations are so close, obviously so close that if we are really forced to choose between the Americans or the Chinese, most likely will be the Americans. We will always choose America even if it makes us poorer. And I think actually we can’t do anything else. We made a conscious choice in them, not really one we could have made any other 100 years ago at the end of the First World War, reinforced by the end of the Second World War that Britain was part of the American system and it was our guarantor and our closest ally and if you look at think about the history of the 2 countries. It was a British colony. It’s inevitable that will be the case so if it really gets to the choice. Britain will go with America. It’s just absolutely obvious 50 years from now America goes into total collapse if China is the dominant power in the world. In all respects, well it could be different, but we’re not there that so we are going to be like Europe. But even more so, particularly because we don’t really have a strong base in Europe and so we are much weaker than we used to be.


Wang Huiyao Great OK, thank you. I think that’s why is G7 Foreign Minister held in London and the UK is playing up a very active role on that? We had a very fascinating discussion. Martin, thank you for taking your precious time and we got over 1 million viewers on Baidu and many live channels. So it’s great. We had a frank discussion and we talked about pandemic fighting, the world economic trend, the future development of globalization, where we have familiar ways on how we improve and globalizing the future. And of course we talked about the peaceful rise of China and how we can peacefully co-exist and the advantage and disadvantage of each other and also a rivalry partnership or cooperative rivalry. So I think we cover a lot of grounds and then finally, adopting the AIIB and all those ideas which then we’re going to well document. Thank you so much for taking your time and. I hope next time when you will invite you come to Beijing and then speak at CCG. So, your final word to the audiences?


Martin Wolf: This’s been a long and very deep discussion, fair and frank too. And I’ve enjoyed it enormously. I believe in the management of our shared planet. It’s a destiny and our duty to manage this planet in such a way that we transmit it to future generations in a good state. And it has many huge challenges. The relations between China and the West will play an enormous part in determining how.


How this plays out over the next decades and indeed possibly centuries? I’m a Westerner I have very strong attachment to our Western values and that’s inevitable. But I think I do so without any illusions about what the West has done – the western history has it faults and crimes. But I am a Western tonight and I don’t want to give up on our core values, individual Liberty, law and democracy, but the great threat to that is internal not from anyone else. But those frictions of power and ideas between the West and China will continue. I think that’s absolutely clear, but I also think they’re manageable because what we share is the key point, is more important than what divides us. What do we share is that we’re all human and we all want to lead better lives? We all want peace. And we want our children and grandchildren, in my case, I have lots of grandchildren, to live fulfilled lives into the next century and that will have close intelligent corporation between us and that will make really big demands on both sides on both China and the West. We’re going to have to do things differently by taking into account the views and interests of each other, in a way that is very unnatural for great powers. But it is particularly great powers, which are divided in so many ways by history and culture, but I think it’s possible. Indeed, it is absolutely essential, the alternative is truly is catastrophe if we end up in a fundamentally ineradicable conflict. We will not be able to manage the world and at worst, we will destroy it. So what is at stake here is all our futures of everybody we care about.


Wang Huiyao: Great thank you. Thank you Martin. You said something very profound there. We’re all human beings. We are all living in the same planet and are all global villagers. We need to look for a better future and also manage our differences and coexist peacefully. And straight for the better future. Thank you so much for taking time talking to us.


Martin Wolf: Pleasure. Thank you very much, bye bye.


Note: The above text is the output of transcribing from an audio recording. It is posted as a reference for the discussion.



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