Editor's Note:
This book is another masterpiece by Klaus Schwab, founder of the World Economic Forum. He systematically analyzed the current global economic development situation and creatively proposed a more equal, inclusive and sustainable economic development model - stakeholder model, in an effort to promote enterprises, countries and the entire human society to embark on a more sustainable development path.
Lin Yifu, dean of the Institute of New Structural Economics at Peking University, said the stakeholder model is similar to the new international pattern of the cosmopolitan world pursued by Chinese Confucian philosophy.
In the book, Klaus Schwab combs through the corporate development and policy practices of China, Ethiopia, Germany, Indonesia and other places, providing guidance for the implementation of stakeholder models at different levels, which is more relevant at a time when the COVID-19 pandemic has impacted the global economy.
The following is an excerpt from Stakeholders.
Emerging markets that have emerged in china
China's rise has in fact fueled a great boom in emerging markets. Looking at the World Bank and the United Nations' 2018 trade data, we can see how much China's rise has contributed to other countries. Today, China has become the world's second largest importer of goods and services. In this growth process, China has provided a strong impetus to the development of several economies, buying a large number of goods from these economies every year.
In 2018, for example, China imported $37 billion, $30 billion and $25 billion worth of oil from Russia, Saudi Arabia and Angola, respectively. Australia is a major source of China's iron ore imports, with a turnover of $60 billion in the year; China also imported $19 billion and $11 billion worth of iron ore from Brazil and Peru, respectively. When it comes to precious stones such as diamonds and gold, China's largest source of imports is Switzerland, followed by South Africa. In addition, China has imported copper from Chile and Zambia, worth $10 billion and $4 billion, respectively, and various rubbers from Thailand, worth $5 billion.
These are just raw materials. As China's position in global value chains has grown, it has begun to outsource some of its production activities and move factories to new, low-cost economies such as Vietnam, Indonesia and Ethiopia. Once, China needed to introduce certain technologies through the establishment of Sino-foreign joint ventures, but now China has been able to develop these technologies independently. This has enabled China to shift its production activities abroad, importing finished products directly and finally exporting them to other countries.
So, like China, many emerging markets have created economic miracles over the past 20 years. The trend that began to take the path of free trade in the 1990s allowed for a slow start; in the years following China's accession to the World Trade Organization in 2001, this trend began to accelerate. According to the Financial Times, emerging markets have consistently outperformed developed markets for more than 10 years from 2002 to 2014, not only in terms of overall economic growth but also in the growth rate of GDP per capita. The result is what the economist Richard Baldwin calls the "grand confluence": poorer emerging markets moving closer to richer developed markets at income and GDP levels.
Unfortunately, this trend has ended in recent years, with the exception of China and India, in most emerging markets. Since 2015, per capita GDP growth in the 30 largest emerging markets has fallen back below the 22 largest developed markets.
Think big
In the 2020s, we may also witness the continued deepening of Asian-African relations, which can complement China's rise. For decades, many African economies have lacked basic infrastructure, education and health care, as well as adequate access to finance. However, as China's economic development level continues to rise and China has a willingness to invest in Africa, some of the factors that restrict Africa's development are now disappearing.
At present, Angola, Ethiopia, Kenya and other countries have become the main beneficiaries of Chinese investment. According to the Brookings Institution, these investments are mainly concentrated in the transportation and energy sectors, but once the road, rail and power resources are in place, it lays the foundation for the development of manufacturing.
So while overall economic growth in emerging markets is likely to slow, some in Africa are likely to continue to grow at a rapid pace, some of which have significant interests in China. In East Africa, for example, Ethiopia, Kenya, Tanzania and Uganda are expected to grow by 6 to 8 percent in the coming years, thanks in part to their ties with China.
Unlike economic growth in the West, the overall economic performance of the rest of the world, particularly in East and Southeast Asia, is very optimistic. Much of this is due to China, whose development has brought wealth to many Chinese and people in other countries. According to Chinese statistics, China has lifted some 740 million people out of poverty. In addition, it has helped other emerging markets achieve higher growth rates, leading the "convergence" of the global economy at the peak of development.
The most important consequence of this China effect is that, by some measures, what many call the "Asian century" has begun. In a March 2019 article by Financial Times authors Valentina Romey and John Reid, shed a salient statistic: Asia's share of world GDP in purchasing power parity terms will be higher in 2020 than the rest of the world combined, for the first time in two centuries.
In 2000, Asia accounted for only one-third of global output. Now, at the dawn of the Fourth Industrial Revolution, Asia is gradually regaining its dominance that has lasted for thousands of years. From the perspective of China's development, from the Internet of Things to artificial intelligence, China is likely to surpass other countries in the world in every field, maintaining a dominant position for decades.
The rise of China, and the rise of other emerging markets that followed China, was indeed an incredible milestone in the history of the world. But we shouldn't lose sight of the big picture because of this.
The entire world has embarked on an unsustainable path of development, putting the fate of both the natural environment and future generations of humankind in jeopardy.
Let's start by looking at the state of the environment in Asia. Many cities in China, Southeast Asia and other emerging markets are experiencing the harsh effects of environmental degradation, pollution and climate change. The World Health Organization said in 2019 that more than 90 percent of the world's population breathes unsafe air by the organization's standards. The 20 cities with the worst air pollution are all in Asia: 15 in India, 2 each in China and Pakistan, and Dhaka, the capital of Bangladesh. In recent years, awareness of the seriousness of China's environmental pollution situation has increased significantly, and recent policy changes reflect concerns about such problems.
Inequality is another major challenge facing Asian economies. According to the research institute, inequality has increased significantly since the 1980s after India "implemented deep economic changes centered on deregulation and reform and opening up" at its core. By the time this administration came to power in 2014, India faced "record levels" of income inequality. Finally, covid-19 has caused additional short-term disruption to the entire global economy, including Asia.
As we have already seen, after the COVID-19 pandemic subsides, Western and Asian societies will still face some common problems: challenges posed by inequality, unsustainable development paths, and possible lack of resilience.
(The title of this article is added by the editor, and the content is slightly reduced)
(This article was published in China Economic Weekly, No. 17, 2021)