English

By Xie Fang

After decades of high-speed economic growth, China is now pursuing a high-quality economic development. As the world’s second largest economy, China’s economic transition will not only be critical to its own future but also significantly influence the rest of the world, especially countries in the Asia-Pacific region.

During a recent interview with the China Fortune Media, Hamaza Ali Malik, Director of the Macroeconomic Policy and Financing for Development Division of the United Nations Economic and Social Commission for Asia and the Pacific, spoke highly of China’s ongoing economic transformation.

“I think it’s a smart move for China to switch from a pure economic growth-led development strategy to a more quality-based development strategy,” said Malik.

In his opinion, a high-quality economic development refers to an inclusive and sustainable development model which is driven by innovation. He pointed out that China’s rapid economic growth over the past forty years had come with a cost. “One is that the inequality in China has been rising dramatically,” said Malik. “The other is the carbon footprint in the environment.”

“So, China needs to pay more attention to those quality aspects of growth rather than the quantity part,” he added.

From his perspective, as one of the major economies in the Asia-Pacific region, China’s economic transition will also have several implications for the overall economic development of the region. “Whatever happens in China will undoubtedly affect all the other countries,” he said.

Malik thought that China’s relentless effort to upgrade its manufacturing industry was making dramatic changes to the industrial chain in the region. “It offers opportunities for countries like Bangladesh and Vietnam to undertake the traditional manufacturing which China was doing previously,” he said.

According to Malik, the rise of China’s middle class also brings about changes to the economic relationship between China and the rest of the world. “China has become a consumer market for final products,” said Malik. “Which means companies in other countries must learn about Chinese consumers and adjust their products to satisfy the Chinese taste.”

“They have to understand the Chinese market from a consumer’s perspective instead of a producer’s perspective,” he added.

When it comes to the further opening-up of China’s financial market, Malik noted that it was wise for China to liberalize its financial market in a gradual manner. He also believed that it would strengthen the link among the financial markets in the Asia and Pacific region.

“Five years ago, developing countries in the region had to pay attention to how the U.S. Fed set its interest rate,” he said. “Now, they are closely watching what China is doing.”

However, he also cautioned that the further opening-up of China’s financial market also meant that the volatility occurring in the Chinese financial market would be more likely to spread to other countries’ financial markets.

Malik also shared his thoughts on the internationalization of RMB. He viewed the inclusion of RMB in the Special Drawing Right (SDR) basket and the signing of currency swap agreements between China and other countries as essential steps for this process.

In his opinion, the internationalization of RMB was critical to the stability of the global financial system. “The dominance of the U.S. Dollar has actually created many problems,” said Malik, “The diversification of currencies is extremely important to the stability of global finance.”

He believed that the launch of the Belt & Road Initiative would greatly facilitate the internationalization of RMB by encouraging the countries involved to settle their transactions in RMB.