China as Responsible Stakeholder or Just ‘Guest’?

China's economy slowsChina's economy slows in July

It seems bizarre that China would want to quell a report highlighting its economic success story. Yet, there are good reasons for its reluctance to endorse it. The bureau’s reservations over the PPP methodology are both understandable and reasonable. Rather than market exchange rates, PPP takes into consideration the purchasing power of a country’s currency, which is a hypothetical calculation that assumes one price level across all countries. Because costs are much higher in the industrialized world, especially for non-traded goods, the comparisons of GDP by PPP exchange rates tend to boost the relative size of poorer nations’ economies. Also, PPP calculations are a statistical construction, based on complex surveys of baskets of goods in many countries, with a margin of error of 15 percent when using its data to compare economies of different sizes.

Similarly, Jeffrey Frankel from Harvard University writes that the International Comparison Program numbers assess the real size of the world economies by comparing GDPs using PPP rates, rather than actual exchange rates. He suggests that this “is the right thing to do if you are looking at real income per capita in order to measure people’s living standards,” but adds that “I would argue that it is the wrong thing to do if you are looking at national income in order to measure the country’s weight in the global economy.”

Yet, behind China’s reluctance to take the No. 1 position are strategic motives as well. The country’s unwillingness to sit at the big powers’ table reveals concerns over the risk that untimely international obligations could clog its economic development. As Charles Kupchan admits, the still-lingering financial crisis and the West’s economic and political troubles have also produced a diminishing appetite for international engagement in the United States and Europe. This explains, as Kupchan suggests, the urgency of gradual shifting of a greater burden on the shoulders of new emerging powers, and especially on China, when it comes to tasks such as conflict resolution and peacekeeping, humanitarian assistance and reducing emissions. “Teamwork requires a consensus on new rules of the road and an appropriate allocation of the burden of responsibilities – including by moving economic agenda from the G8 to the G20, altering voting weights in the World Bank and IMF, and expanding the UN Security Council. A more important conversation entails the reallocation of responsibilities – identifying in what issue areas and in what ways emerging powers will contribute more to the provision of collective goods.”

True, the Western democracies are somewhat ready to accommodate new emerging powers, and even to forge a new and more pluralistic rules-based order, and for the current international liberal order to survive, both Western democracies and emerging powers will have to compromise. Though, as Kupchan unequivocally says, the “West should ensure that it remains the West … Especially if a more pluralistic and diverse international order looms on the horizon, the Western democracies must remain an unshakable anchor of liberal values and interests.” Why then should China play the role a responsible stakeholder in an international liberal order shaped and anchored to Western democracies?

Kerry Brown remarks that China’s demise has been predicted many times over the last two decades, and more often than not this is through wishful thinking. It is not surprising that it now feels some right in refusing to shoulder obligations of an international order in which it did not play a part establishing. This view was shared by a commentary by Xinhua News Agency that argued that “this country has come a long way, but it remains – undeniably – a developing country with too many fish to fry. Some challenges confront China enough, threatening its development sustainability and compelling the country to think less about growth.” This time around, China’s response to a Western invitation to be seated at the table with responsible stakeholders could very likely sound as follows: “No, thanks, I am fine just as a guest.”

Miriam L. Campanella is an associate professor at the faculty of political Sciences at the University of Turin in Italy.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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