Where in the World Will China Invest Its Billions?
Ding Xuedong is Chairman of the China Investment Corporation, China’s largest sovereign wealth fund with $600 billion under management.
BEIJING—While moving toward multi-polarity, the world is also moving toward a three-dimensional architecture. In terms of the GDP, trade and investment, in the past 20 years, the GDP share of G-7 countries in the world dropped from 67% to 47% and that of emerging economies rose from 10% to 24%.
When we look at the global export, the former saw their share decrease from around 50% to 35% and the latter increased from 10% to 20%. Main emerging economies have grown from technology and capital importers to exporters and their share of global FDI soared from 4% in 2005 to 13% in 2012.
Emerging economies have accumulated large quantities of foreign exchange reserves and are playing an increasingly important role in fighting financial crises and stabilizing the global financial market.
Generally speaking, the three-dimensional architecture featuring developed economies, emerging economies and the rest of developing countries has basically been established. In this architecture, emerging economies are fast rising and have become an important force in the international arena in spite of still being developing countries.
The Eurozone has seen its global influence reduced by a certain degree due to its debt crisis. The global GDP share of the least developed countries, however, still hovers around 5% and their development remains beset by many challenges. At the same time, the global governance landscape has also been adjusted. G-20 has replaced G-7 and become an important decision-making platform for global governance.
In the face of these changes in the world, the China Investment Corporation must give full consideration to the interests of all parties and uphold a mutually beneficial business model.
Currently, more than half of our capital is invested in developed economies, but we have also raised the share of capital allocation toward emerging economies and other developing countries.
When investing, we attach importance to building and keeping our communities of interests. For example, when we invest in overseas agricultural and mineral products, our goal is to increase the global effective supply so it will not just be China that will benefit from it in the end. Our investment pays attention to both economic returns and local environment and sustainable economic development. So, in a sense, CIC is a practitioner and an effective platform of building communities of interests.
Unfortunately, efforts to build communities of interests are confronted with investment and trade barriers.
Despite having won the recognition and respect of most countries for its investment concept, CIC is still looked at through tinted glasses by some and its investments are put to strict supervision and double standards that are prejudiced in nature.
In particular, after the 2008 international financial crisis, global trade and investment protectionism has again resurged. Policy barriers are becoming more covert, populism and provincial politics are causing greater disruption and policies are increasingly being made in a self-centered way. This trend deserves our high alert.
It’s no exaggeration that investment and trade barriers have become the main obstacle for building communities of interests. If this problem is not tackled seriously by all parties, building communities of interests will just remain a beautiful dream.
Building communities of interests therefore requires cooperation from all sides to push forward systemic and institutional innovation.
Developed countries should continue to make sure that they take up their due international responsibilities and obligations to set a good example for other countries. They should strive to advance their domestic economic structural adjustment, adopt a more open attitude toward foreign investors and let investment make greater contribution to economic growth.
They also need to implement responsible fiscal and monetary policies and avoid exporting and shifting uncertainties to other countries. Developed countries must continue to take up responsibilities for poverty reduction in the world, for only when economy takes off in poor countries can developed countries have a bigger market.
At the same time, developed countries need to make efforts to reform the global governance architecture and its rules, increase the say and decision-making power of developing countries in institutions like the World Bank and IMF so that they will be able to take part in international affairs better and play their positive roles effectively.
Emerging economies should continue to deepen their reform and opening up their market to release the potential of domestic consumption and make greater contribution to global economic growth. They should make good use of capital export and participation in global industrial chains to build and improve the global economic and financial systems.
Meanwhile, the role of institutions such as World Bank and Asia Development Bank in international poverty reduction and development is shrinking. Emerging economies are planning to set up government funds, BRICS bank and Asia infrastructure investment bank to adjust the current international financial system and its operation mechanism and will be able to play a greater role in international poverty reduction and development.
Other developing countries, especially underdeveloped countries, should work to create a stable political environment, establish and improve their legal systems, accelerate infrastructure construction, develop their domestic resources in a reasonable way and facilitate the development of leading enterprises. They should also actively participate in the division of labor and collaboration system of the international industrial chains to further share the fruits of globalization.