Can Asia Remain the Driver of Economic Growth Despite Containment?
List of speakers

Over the course of the Annual Meeting of the Valdai Discussion Club this week, experts spoke a lot about the role of Asia, and about how the East changes the global political landscape. However, the growth of the East began with the economy, and it was only later that the major, growing Asian states began to change the balance of power. Now a new period has come. The East has grown, but those states that once launched the process of globalisation have realised that it is no longer working in their favour, but in favour of the Eastern powers. Will Asia remain the driver of economic growth despite attempts to contain it? This was discussed on October 3rd by experts during the ninth session of the Valdai Club Annual Meeting, which was held in the Chatham House format.

An extremely favourable period for the development of Asia occurred in the 1980s-2000s. It was then that China became the largest economy of the world. The new world order is less friendly to Asia. Trends that will change the global economy over the next ten years (automation of production, the introduction of artificial intelligence, and the change in consumer culture towards services, experiences and the individualisation of consumption) will make Asia change structurally; it will be difficult for it to maintain a leading position.

Today, Asia accounts for a large share of the global economy, especially in terms of purchasing power. Asia is turning from a global producer into a global consumer.

China is one of the most influential players in the region. But it has internal problems. It is vulnerable, for example, in terms of its capital market. Rich Chinese cannot take money out of the country. In Hong Kong, young people perceive this as a signal to dissociate themselves from China.

In addition, in China there has always been (and remains) a confrontation between the public and private sectors. But during the last year, because of the trade war, they began to seek common ground. These are positive changes for China, where private property is very developed. In this regard, Deng Xiaoping’s phrase “that it doesn't matter if a cat is black or white so long as it catches mice” can be slightly changed: “it doesn’t matter if property is private or public, so long as it serves the good of the country.”

Much has been said recently about the slowdown of China's economy. There is a myth that the higher economic growth is, the more happy people are. This simply isn’t true. China did not really plan to lead the whole time. There is the example of Donald Trump, who accelerated the economy to 3% growth, but it is not yet clear how this will affect the United States. After all, there are other examples: in 2017, Turkey increased its economic growth to 10%, and then fell into a recession with rising unemployment. Overstatement of growth leads to an imbalance in the economy. China is quite happy with a growth rate of 4-5%; it is not necessary to raise the bar above 6%.

The world is witnessing a confrontation between development platforms. Despite the fact that the Chinese platform grew from the Western one, it has already detached itself and will now develop its own way. The Americans have closed their market, so the Chinese will close theirs. Europe, too, is beginning to worry about China. Europeans feel that they have been naive over the last 10-15 years: they gave China much more than they received from it.

Most likely, a truce will be reached in the US-China trade war: it is beneficial for Trump to sign an agreement with Beijing before the 2020 elections. In the meantime, this trade war creates new opportunities for Vietnam, Indonesia and India.

But if we assume that there will be no truce, the confrontation between China and the West will intensify and other Asian countries will be drawn into it. Every Asian country will sooner or later face a choice: China or the USA. Few can sit on two chairs at once (an exception may be the ASEAN countries).

Of course, in the face of the confrontation between the Western and Chinese development platforms, Russia cannot be a satellite of one of them. It must have its own "self", but no one can prevent Russia from relying on the markets in neighbouring regions.

As for attracting Asian investments to Russia, first of all it is necessary to decide whether it needs these foreign investments. What do they provide? It is simply money that comes to the country? Russia does not need it, because it has a budget surplus. Also, investments bring management and production technologies, open up new sales markets and remove barriers to foreign markets. Of course, the last two points may be interesting to Russia.

The climate agenda is becoming a real factor in economic life, so it is not surprising that during the Valdai Club session, this was also discussed a lot. One of the speakers recalled that not so long ago Elizabeth Warren, a member of the Democratic Party, wrote that the protectionism of Donald Trump does not meet the current agenda. Another thing is climate protectionism, when countries will be able to restrict the import of certain goods, referring to the fact that in their production there are not enough “green” technology. This is something that, for a well-known reason, can allow other nations to endlessly blackmail and “legally” contain China and other Asian countries, the experts noted.

An interesting fact: a significant proportion of emissions in the BRICS countries is generated because they export the products of their dirty industries to developed countries. While saying that they’ve reduced emissions, Western countries remain silent about the fact that they’ve actually replaced their emissions with imported ones.

Thanks to ongoing energy reform, Russia may become the first country in the world to reduce emissions by 2050. But it’s not enough just to cut them, it is important to understand what goals it can achieve because of this. Resource-intensive “green” products are what it can offer the world.

This year, the Annual Meeting of the Valdai Discussion Club will last four days - from September 30th through October 4th. Almost all sessions will traditionally be held according to the Chatham House Rule.

The schedule of all discussions and speakers can be found in the Programme.