Something unusual is happening to China's economy.

High-rise residential buildings whose construction has been suspended

are becoming a common sight in cities across the country.

The real estate market, once a symbol of growth, is experiencing a major shakeup.

Evergrande Group's money ran out and construction stopped.

Strong consumer spending.

Strong investment, including in the construction industry.

With the world's largest consumer market,

China has been an economic powerhouse since the global financial crisis of the late 2000s.

And with the effects of the Covid pandemic now behind it, China's economy was predicted to bounce back.

But things are not going as well as expected.

Sales of relatively expensive items such as appliances and furniture remain below pre-pandemic levels.

My income is down and we are trying to save as much as possible.

I've learned not to waste money.

What is really going on with China's economy?

What impact will it have on the rest of the world?

We'll explore those questions with our panel of experts.

We're seeing changes to China's economy, the world's second largest.

Take a look at this chart.

It tracks the growth rate for the economy.

As you can see, growth has been slowing down in recent years.

Well, in this episode of GLOBAL AGENDA,

we'll take a deep look into what's happening in the economy with experts from around the world.

Let me introduce our panelists.

Now first, from China, Yang Yao, professor at Peking University.

So, Dr. Yao, if you had to use one word to describe the Chinese economy, what would it be?

One word, recovery.

Recovery. Okay. Thank you very much.

And from the Philippines, Albert Park, chief economist from Asian Development Bank.

Great to have you. So how would you describe China's economy? In a word?

I would say also recovering, moderate growth.

That's three words.

Okay, good, good.

And in this studio, Professor Takahara Akio of the University of Tokyo's Faculty of Law.

So, Dr. Takahara, how is your take on China's economy?

I would choose the word patchy.

So certain sectors are doing well, but others are not doing very well at all.

So, the word is patchy.

Patchy. Thank you.

And from the United States, Mr. Jordan McGillis is with the Manhattan Institute.

His research has included issues related to China's energy and trade policies.

So, Mr. McGillis, how would you describe China's economy in a word?

I'll need three. Slowed, but not stopped.

Slow, but not stopped. Okay.

And Ke Long of the think tank Tokyo Foundation Institute for Policy Studies.

So, Mr. Ke, what is your take on China's economy in a word?

My one word is crossroads.

Crossroads?

Yes, depending on the reform. Otherwise, crash.

Crash. Okay.

So, before we go any further to discuss the issue,

here is a brief summary of what has been happening in China.

China Evergrande Group is one of the country's leading real estate developers.

By the end of June this year, the company's debt had grown to more than 326 billion U.S. dollars.

In August, it filed for Chapter 15 bankruptcy protection in a U.S. court.

Evergrande Group, return the money.

Many other real estate companies are also underperforming.

Some have reported poor management or gone bankrupt.

China's real estate sector, including related industries, accounts for one-third of its GDP,

and it should have served as the backbone of the country's economy.

Urban youth unemployment is also a serious problem.

Official statistics show it's at the worst level ever recorded; in June, it was 21.3%.

But the government has stopped releasing numbers, leading to all kinds of speculation.

The bad economy makes it hard to find a job.

Many companies are cutting back on staff
and not recruiting aggressively.

Usually, many people travel abroad for the National Day holiday in October.

This year, the total number of overseas travelers reached 80% of pre-pandemic levels,

but that was far lower than forecast.

Travel to Japan was also lower than expected.

The country's strict anti-Covid measures have been lifted,

but people are still not spending at pre-pandemic levels.

Now let's look at China's economy in detail.

So, Dr. Yao, I'd like to start with you.

So, you mentioned recovery.

So, does this mean that the economic slowdown we were seeing

in China right now is cyclical rather than structural?

Yeah, basically, I agree with your assessment.

But I also want to add, that the slowdown of the economy,

like your film just showed us, has been very much related to the slowdown of the property markets, right?

But the slowdown or even decline of the property market

has been a result of the government's intentional correction of the sector

because we know that sector relied heavily on debts and absorbed too much resources

that the decisionmakers believed it was too big and, in some cases, too chaotic.

So it needed a major move to correct that sector.

So, because of that, I believe, you know,

Chinese leaders are still determining for economic reform, for a healthy commerce structure.

Thank you.

Mr. McGillis, do you agree with Dr. Yao?

How do you see China's economy?

I agree with certain points that Professor Yao makes.

I think that there are adjustments that the government in Beijing and at the local level can make

to get China's growth back up to the place where it wants it.

Certainly, we've seen a slowdown in relative terms, but as the professor points out,

in absolute terms, the growth numbers are as strong as many other economies.

I think if China makes reforms to correct these imbalances

that the professor points out, there could be a resurgence on the horizon.

Okay. Thank you.

And Mr. Ke, do you agree with Dr. Yao and Mr. McGillis

that this is a slowdown and this recovery is imminent?

Well, basically, I agree with them.

But I have to say the COVID-19 damage to, you know, Chinese economic fundamentals.

But originally, actually, the Chinese economy can, you know, are going to develop.

But in the past ten years,

I think all of the reforms have been, you know, postponed.

So, I just want to stress and emphasize that Chinese government need to do more efforts

to deepen the reform and to liberalize and deregulation and also privatize, as, for example.

Otherwise, I don't think they can recover from the slowdown.

And Dr. Park, how do you see China's economy?

There were some bad numbers that came out of China in July

with negative inflation and very negative real estate investment.

But if you look at the August numbers after the government instituted some policies

to try to support demand in the real estate market, you know,

there are some slightly improving numbers.

At the ADB we've projected China to grow at 4.9% this year and 4.5% next year.

Of course, that's still slow in growth.

And the structural part of this is that, you know,

China's growth has been slowing for a year, I mean, dating to before the pandemic,

it used to be double digit growths.

And of course, we're projecting in, you know, this five-year period, it'll be in this 4.5 to 5% range.

But in subsequent years, it's likely to go down because of headwinds related to rapid population aging,

a shrinking labor force, a steady kind of productivity slowdown that they've experienced.

Okay. So, Dr. Park, you know,

some people compared China's slowdown to Japan's collapse of the bubble in the nineties.

Do you think that will happen to China? Like, is China leading the same path?

Very unlikely.

You know, China's still GDP per capita is something like 30% of the U.S. GDP per capita.

Japan, when it had its slowdown, was like at 80%.

There's a lot still more kind of catch-up growth and growth momentum.

China also has been very good at betting on rising industries like renewable technologies.

Some of the high-tech areas, they're very strong.

So you really don't see, you know, a collapse that's imminent.

Mr. Ke, do you agree with that?

Well, I think that before we compare Japan and China,

we need to make it clear the reason of the slowdown.

Japan experienced it in the last three decades.

But I think basically that is a market failure, not a policy failure.

And another point is that although Japan lost three decades,

but Japan maintained the one key factor - that is technology.

So Japanese government and Japanese economy just recovered gradually in the past three decades.

But from now on, we turn back to China.

I have to say that we have a lot of difficulties.

First of all, it's a policy failure.

And another point is that we could lost the technologies,

especially with experiencing the three-year COVID-19;

more and more foreign factories there were removed to other developing countries, for example.

So how to make the foreign companies to - how to say -

factories to do business in China from now on?

This is the point, I think.

So, Dr. Yao, what do you think of China going down Japan's path in the nineties?

I think it was if we want to compare China to Japan,

the right time we have to compare - it's not the Japan in the 1990s.

It's Japan in the 1970s.

It's about that time, Japan's per capita income was also about 30%, 40% American level.

And Japan, at that time, was having the best of times in Japanese history in thousand years.

In terms of technology, China, today, is at that stage.

I tend to agree with Albert.

You know China is on the forefront of many new technologies.

AI, EVs, alternative energies.

And these EVs - China's output is now about 60%.

Overall, the total implementing about solar panel equipment, China accounts for 90%. Right?

So those industries are going to be the industries for today and for tomorrow,

and then China is at a leading position.

So, I really don't think technologically China lacks behind the world.

You know, in fact, China is leading the world.

And what about Dr. Yao's point

that China is leading the world right now in technology, EV, solar panels?

In some technology, I think, it's possible,

but you can find that most of it though, tech companies like Alibaba and Tencent,

most of them were, you know, started in 1990s, not today.

So, from now on, whether China can continue their innovation and creation,

this is the problem, I think, we don't know.

Okay. So, I guess that leads us to what influence the Chinese government has on the economy.

So, Dr. Takahara, what is your view on that?

I cannot be too optimistic like some of our fellow panelists sounded

because I remember how things were in 2019, just before COVID started.

I think many of you remember how pessimistic and, you know,

the sense of crisis even that was shared amongst many leaders at that time.

They were desperately looking for new engines of growth and they couldn't find one.

And you know, nowadays what the ordinary people say in China is that

we have a very good engine of growth in China, and that is the central propaganda department.

So many ordinary people in China remain quite worried and concerned.

And when we think about the political implications of that, if things could be very serious,

since I tend to see Chinese politics in two dimensions or two axes in Chinese politics.

One is the horizontal axis that is the high-level politics between the leaders.

But there's also another very important axis that is the vertical one,

which is the relationship between the party and the masses, or between Mr. Xi Jinping and the ordinary people.

And because of the economic downturn and because of the failure of the zero COVID policy last year,

this vertical axis is shaken very much.

So, when we look at what's happening at the societal level,

there's been an increase in labor issues which include not only youth unemployment

but also wage arrears in factories, construction sites and other workplaces.

And I think Mr. Xi Jinping has to find a way to break this vicious circle, as it were.

You know, there's economic downturn and there's this rise of anxiety,

and decreasing trust amongst the people in the future of the economy, decreasing the trust in the system itself,

which will decrease the willingness to consume and to invest in the economy.

And, you know, that would lead to a further downturn in the economy.

So, you know, we have to think about China,

the slowdown as a consequence of the government's deliberate adjustments.

It's nothing about China's long-term growth as you've just alluded to.

You know, China is at the forefront of many technologies and actually

China does not lack behind in many future technologies, like fusion, you name it.

So it's just the government's intentional reform merit that have slowed down the economy.

And that's intentional. The leaders know the cost.

And they believe that if we pay the short cost, we are going to have a brighter future.

Mr. Ke, do you agree with that?

Is it intentional adjustment of the economy that we are seeing now?

Well, personally, my concern is that whether China can lead the economy to a soft landing.

From now on, I think Chinese economists and professors, like Yao,

can recommend to China's government to do more reform, to do more efforts to avoid a hard landing. Yeah.

Now, amidst these shifts in the economic landscape,

China has been strategically investing in the field of advanced technology.

Well, it's a key part of the struggle for supremacy with another superpower, the United States.

The United States and China are competing fiercely

in the development of technology for semiconductors, especially advanced semiconductors.

In August 2022, President Joe Biden signed a law that provides large subsidies to domestic semiconductor manufacturers.

It reflected the sense that the U.S. was lagging behind the rest of the world

in the production of these key components.

Unfortunately, we produce 0% of these advanced chips today. Zero percent.

And China is trying to move ahead of us in manufacturing them.

The following October, the U.S. implemented controls on

exporting semiconductor manufacturing equipment and other items to China.

China announced restrictions on the use of Apple iPhones by government agencies.

And in August of this year,

it began restricting the export of two rare metals used to make semiconductors.

The US is continually increasing pressure and
restrictions on Chinese semiconductors.

It is artificially dividing the global semiconductor market.

Against this backdrop, China's Huawei released its latest smartphone, the Mate 60pro.

U.S. Officials were surprised to learn that it contains advanced semiconductors using 7-nanotechnology,

which could not have been made in China.

Meanwhile, the volume of trade between the U.S. and China reached a record high in 2022.

The reality that the two economies are inextricably linked has become clear.

So, Mr. McGillis, how do you see the fact that Huawei came out with its latest phone,

reportedly with a seven-nanometer chip inside?

There are a lot of unanswered questions still about the development of that new phone.

Certainly, it was an impressive piece of technology.

What the purpose of the various approaches that the US government has taken

toward semiconductors and toward microelectronics generally and the Asia-Pacific -

What this is oriented to is building resilience into the US economy,

to be frank, around the political risks regarding Taiwan.

The fear in the US is that, in the event of a conflict, maybe, perhaps a blockade,

something along those lines, the US economy will be cut off from TSMC's high-end chips.

That is why there's been this bipartisan consensus around investing in subsidies for high-end chips here.

Whether that will be successful or not remains to be seen.

Now, simultaneously, the US has implemented restrictions on both

the export of high-end microelectronics and it's implemented additional screening on outbound investment.

That is to slow down China's development of these high-end technologies

for the purpose primarily of their use in military applications.

But of course, as we all know,

militaries and commercial companies use high-end chips much the same.

So the results, even if it's oriented toward the military of China,

may have the implication of slowing its economy slightly,

but it may have the countervailing consequence of spurring more indigenous development.

This may advance the pace at which China's chip companies are scaling up and getting investment indigenously.

And Dr. Yao, what does this latest Huawei Phone mean against the backdrop of US sanctions on China?

Well, I tend to agree with our previous speaker.

That is, if the United States tighten up the control, high-end technical products export to China,

China will speed up its own indigenous innovation.

Huawei's new phone just shows that.

Actually, I think people have put too much emphasis on this - Huawei's new semiconductor chips.

So, what I want to say is that American export control is detrimental not just for China, but also for U.S. economy.

You know, innovation should follow comparative advantage. Right?

United States has a lot of advantage in, say, A.I.

and China has that advantage in manufacturing,

and other countries and other regions have other advantages.

And because of this export control, then China has to manufacture its own semiconductors.

That's not in China's comparative advantage, right?

But in the meantime, United States wants to do, say, solar panels.

That's not in U.S. comparative advantage.

It's where we scale our money, right?

So, we were in a much better world before United States geared up export control on China.

So, Mr. McGillis, what do you say to that?

You know, it could hurt American companies more than China, and it's costly for everyone.

What do you say to that from the U.S. point of view?

From a purely economic perspective, I would have to agree.

But the consideration that is taking precedence right now is on the national security axis.

And we all know that there can be some contention between those two considerations,

getting rich versus staying secure.

And the calculus that the U.S. body politic is making, both Democrats and Republicans,

is that some derisking, some decoupling coming from government is going to be necessary

to safeguard American national and economic security,

even if that comes at the expense of the comparative advantage points that Dr. Yao makes.

So, Dr. Takahara, how do you see U.S.-China, well, from the political point of view, as Mr. McGillis pointed out?

You know, I don't think we can avoid the tension intensifying even further from this time

because there is real fierce competition fought between the U.S. and China over security, over technology.

But at the same time, you know, even though the trade amounts have come down somewhat this year,

still, the economic partnership between the two countries is the most significant in the world.

So I think such contradiction, so they compete fiercely on the one hand, but keep on cooperating on the other.

And this will continue for some time to come,

and both sides will desperately try to manage their relationship

so that the competition will not derail and become a confrontation,

but this is going to be increasingly difficult.

But both sides will do their best, I hope, to manage the relationship.

Okay. So, Dr. Park, what do you think of decoupling or derisking between these two superpowers?

Now, we just heard that there's tension in politics, but these two economies can't really part.

Right. Well, first, I want to say that, you know,

the rise of protectionism and the rise of competing industrial policy really

is bad for global growth and really harms everybody,

and these are very risky bets that the US is making on the new industrial policies.

China, too, I think has too much of a state focus on subsidizing industries.

I think Huawei is a great, innovative firm.

And they're innovative not because they're getting subsidies, and a lot of subsidies -

and China, too, are, to be honest - wasted.

Now, in terms of decoupling, at the Asian Development Bank, we're, of course,

very concerned about development in all of the countries in the region.

And most of the third-party countries are trying to stay out of the fray.

They'd like to stay committed to multilateral open trade and investment.

And the U.S.-China trade war, of course,

presents some opportunities because third-party countries can export more to both sides.

And we see that, for instance, with Vietnam increasing exports to the U.S.

But again, there are these aggregate costs.

It's making all of the supply chains less efficient,

and it's hurting the competitiveness of exports throughout the region, I think.

The other thing that's important is that so far countries in the region,

especially in ASEAN, have not really been asked to choose sides.

And there's been research which shows that, you know,

if they were forced to really decouple and pick one side or the other,

that it's really not the U.S. or China that would be hurt the most.

These are large economies with big domestic markets and many trading partners.

It's really the smaller third-party countries that trade both with China and the US who would be hurt the most.

So, Dr. Yao, you know, Dr. Park mentioned that China also has subsidies,

puts priorities on state-owned enterprises and subsidizes them, and that could hinder globalization.

What do you say to that?

So facing the U.S.-China political and geopolitical competition, we are living in a suboptimal world, right?

So, in a lot of sense, China's industrial policy has been a response to our American export control. Right?

So, think about five years ago, China didn't invest that much into chipmaking, right?

Well, first, I need to strongly disagree with Dr. Yao,

on his argument that China's industrial policy is a response to the U.S.

From the perspective of the States, it's quite the reverse.

The American body politic observed China's initiatives with "Made in China 2025" and various other forms of industrial policy,

and paradoxically became quite fearful that China would race ahead in these key emerging technologies.

I would argue that America's economic advantage is that it is a market-oriented economy, and that it's an open society.

But we saw this initiative from China and feared that it would allow China to get ahead.

The response has been that there's been this emerging bipartisan consensus to mimic some of those policies,

to focus on subsidizing particular industries at the expense of economic efficiency.

But there's also this idea that I think we need to consider of maintaining

and indeed enhancing globalization within a market-oriented network of likeminded countries.

So, we think of the Northeast Asian countries of South Korea, Japan.

We think of Taiwan, and then hopefully we can loop in the Southeast Asian countries as well.

I believe Southeast Asia is the domain in which globalization

will be most interesting to watch and will be most contentious,

as some of the other panelists have observed as well.

Dr. Yao?

Yeah, that I was not saying that every industrial policy of China has been a response to United States export control.

I was just specifically talking about the semiconductor sector, particularly the manufacturing part of that sector.

So, I agree, China has done industrial policy from the very beginning.

But we have to think about if the industrial policy is geared toward innovation,

that's on the forefront, right?

For example, EVs. For example, solar power, wind power.

Yeah, Chinese government has invested hugely in that sector,

but that's welfare-improving for the whole world because no one was doing that.

Think about the solar power, it was so polluting, right.

Fifteen years ago, twenty years ago, we economists criticized the Chinese government a lot.

Why do you do this? This is so polluting.

But it turned out that 20 years after,

China has made a huge contribution for the whole world, right?

So, in a sense, China took on a cost,

and then that provide welfare for the whole world, okay.

But then in semiconductor, that's a different stuff.

Okay. You know, manufacturing is still there and more advanced than China can do today.

Why China should do that?

That's totally wasteful, and so the only reason is the America export control.

Well, I think that this is the problem of the system, I think institution, especially in China, you know.

I do think that the government want to realize development,

although, also want to improve the development of technology.

Everything is okay.

But the problem is how to realize the goal to liberalize and to privatize as we,

for example, we can find that all of the things are too slow.

Okay?

I think I see. Okay.

Now, U.S. and China are not the only economies in the world.

Well, we now take a look at how China's economy is impacting the rest of the world.

On October 2nd, Indonesia's first high-speed railroad,

for which China was awarded the construction contract, began operations.

It connects Jakarta with the major city of Bandung, spanning approximately 140 kilometers.

I'm proud of the high speed rail we have.

However, the opening took place four years later than planned.

And the Indonesian partners, who were supposed to bear no financial burden,

ended up paying for the construction.

Some Indonesian officials expressed dissatisfaction.

By building the Belt and Road together,
China opens its doors wider and wider to the outside world.

On October 17, China held an international forum

to commemorate the 10th anniversary of the sprawling "One Belt, One Road" economic zone initiative.

It was launched by Xi Jinping in 2013.

The aim is to build a logistics route from China to Europe

and provide development assistance and investment to countries along the way.

Including through projects such as the Indonesian railway.

Meanwhile, in Sri Lanka, Hambantota Port was developed with a loan from China in 2017.

But, unable to repay it,

Sri Lanka had to cede control of the port to China under a 99-year lease agreement.

Since 2013, 240 billion U.S. dollars in direct investment alone has been committed to One Belt One Road,

which China claims has contributed to infrastructure development in the countries involved.

However, the dramatic changes to the economic environment over the past decade

are also casting a large shadow over President Xi's pivotal project.

So, Dr. Park, China is a big player in the debt market and also in the world economy as well.

But how exactly is China's influence on overall developing economies and the world economy?

Well, we've had a kind of a rule of thumb in the ADB,

that one percentage growth in China leads to 0.3% growth in the rest of Asia.

And it's still important; it's still linked very closely through trade and investment relationships.

And even despite the fact that FDI to China has declined,

China's role in supply chain networks doesn't seem to have declined;

if anything increased since the start of the U.S.-China trade war.

I also think China can play other leadership roles in development in the region

because of its technological and institutional strengths.

China has very competitive firms in many industries,

and they have technologies which are actually more appropriate to other developing countries,

factoring dominance then technologies from more advanced countries because China, you know,

not too long ago was itself a developing country.

And so, I think it can really make contributions through these close ties,

through supply chains to promote competitiveness in other countries in the region.

So, Dr. Takahara, what do you think of the Belt and Road Initiative by China?

Well, I think it's a product of genius.

I mean, the concept of the Belt and Road Initiative.

You know, the Chinese Communist Party is so good at producing those attractive, in this case,

even romantic concepts that would attract the interest of people all over the world.

I tend to liken these concepts to constellations in the sky, you know,

because the concepts are not tangible, real.

The real things are the stars in the sky.

And I don't think anybody has actually seen a constellation, a real constellation, because they don't exist.

What's up there tangible are the stars. I mean, the project.

So, Xi Jinping is pointing to the sky and saying,

You see so many projects. There are so many stars there. You see a dragon.

That is the Belt and Road Initiative.

And we all go, "Wow."

So what I want to say is that we should not be dazzled.

We should not be mesmerized by the concept, it should be bankable, economically viable,

and also it should not affect the fiscal soundness of the recipient nation.

So, I think in many recipient countries,

there's on the one hand disappointment that what they expected

didn't come in terms of the amount of money and so on and so forth.

But on the other hand, there are still country,

and there are countries that are still hopeful that those benefits will come.

And I tend to see, however, that generally speaking,

there is a rising sense of concern or caution amongst the recipient nations

because they have observed countries like Sri Lanka or Zambia default.

The point is that the Chinese have not been very helpful

in saving these countries out of the trouble that they're facing.

Right. I think the previous characterization of the Belt and Road is a little bit maybe overly negative.

I actually think most of the infrastructure projects, you don't have to look for constellations in the sky,

just look at the ports, look at the airports, look at the roads, look at the rails.

Many of them are useful projects for the country's development.

I think it is true that China could do a better job,

and certainly in the past on some of the projects in terms of making sure they were high return projects,

sometimes I think they were too willing to do what local governments asked for

or local government leaders asked for without doing perhaps full due diligence.

I think it's unfair to feel like the country is being manipulated by China or the U.S. or anyone.

They have agency, and especially many of the countries in Asia, they're developmental states,

and they're trying to do their best and usually they're trying

to incorporate Chinese support into their own infrastructure development plans,

and that, I think, has been a positive.

- Can I just—
- Sure. Dr. Takahara...

So, don't get me wrong.

I'm not really critical of the concept itself, you know,

and if the projects are good projects, they're going to stay.

They're going to be developed even further.

So, I fully agree that certain projects, certain railroad projects, you know, there are good projects.

So, what I'm saying is that we should look at the project

because the stars are real and those are the things.

The projects themselves are the things that we should focus on,

and we shouldn't be dazzled by the idea, by the concept, because that's the constellation, and that's my point.

I see. Okay. Yes.

And Mr. McGillis, how does the U.S. see the Belt and Road Initiative?

Well, it tends to be viewed very negatively.

It tends to be viewed as a geostrategic project.

And the term "debt trap diplomacy" is thrown around with frequency.

But I agree with Dr. Park that, that denies agency to the recipients of the funding,

and they have their own motivations, and if they can maintain their governmental practices,

then some of these projects indeed will prove beneficial.

I think that it's appropriate that the intro video referred to Indonesia.

I think that's the most important country in the network

and the most important country when we look at geostrategic competition between these two rising,

or pardon me, these two existing powers, the U.S. and China.

If the Bandung Jakarta Railway becomes economically successful,

that will make China look very good to Indonesia.

But at the same time, the Indonesians don't really want a strategic or defense collaboration with China.

The survey data from the ISEAS - Yusof Ishak Institute in Singapore shows that

Indonesia and other Southeast Asian countries want the economic benefits of these linkages with China,

but they want to maintain a position of neutrality in geopolitics and

are happy that there is a U.S. presence strategically in the region as well.

We describe that - or consider that the Belt and Road Initiative as a common market initiative.

It's okay.

But under this story, we need to build a common rule that is operating effectively.

So what is a Belt and Road, and also as Dr. Takahara said, that many developing countries,

they cannot invest in the big infrastructure projects by themselves and borrow money from China,

or then they are facing some difficulties to repay their debt.

So, this is the problem, I think.

Dr. Yao, what do you say to that?

You know, all these recipient countries,

some of them have huge debts to China but the Chinese government or the Chinese creditors are hard to negotiate.

Those recipient countries actually have the responsibility to do their own due diligence. Right?

They have their own agencies.

So, I don't think that problem can be blamed on China.

It's more about recipient countries' own management of those debts.

Okay.

But having said that, we have to notice that China has launched,

I think in the last three years, at least two rounds of debt forgiveness, right?

Or a refinance of the debt, so something like that, right?

So, we all know that in the end that most of the debts are going to be forgiven, so.

And it turned out that, too, those debts are going to become gifts from China anyway.

Dr. Park.

So, all the support is welcome, and even the competition with the U.S. and Europe setting up new investment funds

that are supposed to counter Chinese investment.

I think that's great as long as the recipient governments

can use all of these funds to support their development from all sides.

That would be a positive.

But actually, it's also fair to say that thus far Chinese bilateral investments of this type,

the amount of aid and of loan-financed infrastructure is probably as much as the next five leading countries put together.

So, it's been enormous-

as what we have seen in Sri Lanka, in Asia, Laos more recently, but also many African economies.

And here, China could, I think,

do a lot better kind of working more collaboratively with other donor governments

and multilateral banks to come up with solutions.

Part of the problem is there's really no multilateral framework

for how to properly restructure debt and to define what are the responsibilities

of different donors or lenders in the event of these debt distress,

so that needs to be a collective effort to develop those rules.

But I think China, difficulty in negotiating terms with China has slowed down the agreements in Zambia

and is slowing down Sri Lanka's ability to come back quickly.

So, I think that is an area where it would be great to see China be more of a team player.

So, as we've been discussing,

globalization benefits all countries and all economies regardless of U.S. or China.

So, to wrap this discussion,

I would like a brief comment from each one of you about

how can China, U.S., and the rest of the world coexist and aim for a robust global economy?

So, Dr. Yao.

Well, I think the world today is in a very different stage than the past 30, 40 years.

I mean, in the past 30 years, we lived in a U.S.-led global order,

and everyone expected everyone to converge to the American system, including China.

But clearly China shows the determination to go its own way,

and thinking of the task for the world, in particular for the United States,

is to think about how to coexist with China, which has quite a different political system,

and it is going to hold on to that political system for the foreseeable future. All right?

We are not going to get into a new Cold War, but what's the new global order?

I think that's the question United States has to think about it.

Mr. McGillis, what is your view on coexisting and aiming for a robust world economy?

I want to put the onus primarily on China here.

Earlier, the word crossroads was invoked, and I think indeed China is at a crossroads.

It has to choose whether it wants to continue down this state-led, dirigiste-oriented economic model,

or if it wants to readopt some of market reform thinking

that led to its spectacular growth in the eighties and nineties.

I think there's one particular thing that China should do if it wants to reaccelerate that, its growth,

and that is further reform its "Hukou" restrictions which prevent the agglomerations of talent

that could help China to continue to develop.

Similarly, if you look globally,

I think talent agglomeration, allowing people who have skills to move to where they can be most productive,

is what can help us have a functioning, healthy, and indeed enriching globalized economy.

And Dr. Park.

Well, I think intense geopolitical competition between the two largest economies in the world

doesn't help the other countries in the world very much.

And so, I hope in the future the way to maybe make progress

is to focus on global development issues like climate change and prioritize them,

and also development in poorer countries,

which is our mission certainly here at the Asian Development Bank.

But even within the context of competition,

to focus on what can we do to support healthy development in countries around the world.

And Mr. Ke.

Yes. I think the important thing is how to share the value, the culture, and also work on the same global rule.

I think China is a big country and is going to be a strong country.

And of course, China is one of the leaders in the global society.

So, I think that we need to do more effort to improve our global society to be more free, more fair, and more global.

Dr. Takahara.

Well, for the superpower and the superpower candidates to coexist and co-prosper,

I think we need rules to achieve that.

And in order to have the rule of law,

I think it's most important that the two countries put their own houses in order.

We are very much concerned about democracy in the United States today.

And of course, in China, we see that the internal order in China is not supported by rule of law,

but rather by the outstanding power of the Chinese Communist Party.

And I think what we need internationally is a reform of the United Nations system.

Otherwise, we have seen that if we left it to the so-called big powers

or the permanent members of the Security Council, we cannot maintain peace.

So how can we reform the system, the global governance system, and have a new world in which rule of law prevails,

not only internally in each country, but also internationally.

We need to discuss.

We need to gather our wisdom and aim to achieve that together.

Thank you very much for your valuable insights.

Now, an economic slowdown in China will have ripple effects across the globe.

Well, finding a solution will require dialogue and diplomacy.

We'll keep a close watch on whether economies will find a way

to coexist for the world economy to grow further.

And that wraps it up for this edition of GLOBAL AGENDA.

Thank you very much for watching.