Imperial Springs International Forum

The 2015 Imperial Springs International Forum (ISIF) convened leading Chinese and international political, business, and intellectual leaders to engage in conversation and advance constructive solutions to today’s critical global security, economic, and development challenges. The Carnegie–Tsinghua Center served as the forum’s knowledge partner and organized a series of panel discussions on these topics. Located at the Imperial Springs International Convention Center north of Guangzhou, ISIF highlighted Guangdong Province’s historical position at the center of China’s bold reforms and engagement with the world. 

Discussion Highlights

• Venue for Constructive Dialogue: The keynote speakers underscored the conference as an important venue for discussing China’s role in the world and opportunities to forge greater international cooperation on issues such as economic development and regional security. Guangdong’s Party Secretary Hu Chunhua praised the forum as an “important platform” for exchange about the province’s economic development and global outreach through China’s Belt and Road Initiative. President of the Chinese People’s Association for Friendship with Foreign Countries Madame Li Xiaolin suggested that the event was a valuable opportunity to discuss common security and economic challenges facing China and the world. 
   
• China’s Remarkable Growth: Speakers praised China’s remarkable economic achievements over the past several decades. Former Australian prime minister and ISIF co-chair Kevin Rudd noted Guangzhou’s economic development since his first visit in the mid-1980s, thanks in part to the efforts of President Xi Jinping’s father, Xi Zhongxun, who opened the province’s special economic zones in the early reform era. Former Mexican president and conference co-chair Felipe Calderon asserted that China’s growth has “changed the world’s economic equation” and suggested that the shift to a low-carbon economy is a key area of future growth as the country adjusts to a slower economic pace. 
   
• China on the World Stage: Speakers observed how China’s economic success and Xi Jinping’s leadership have led China to become more active in global affairs. Madame Li stated that people around the world are paying more attention to China’s policies. Speakers concluded that China will be a vital actor in global efforts to cultivate economic prosperity and preserve a stable, secure international environment. 
   
• An Interdependent World: Speakers noted that economic interdependence and transnational challenges such as climate change have linked the fates of individual countries more closely together. Former Italian prime minister and conference co-chair Romano Prodi explained that globalization is driving international affairs and will continue to do so for the foreseeable future. Marty Natalegawa, a forum adviser who previously served as Indonesia’s foreign minister, asserted that change is a permanent feature of the international system that calls for countries to remain adaptive. President of the International Peace Institute and conference adviser Terje Rød-Larsen suggested that the security challenges facing the world, such as terrorism and instability in the Middle East, will only be mitigated through coordinated efforts. Carl Bildt, former Swedish prime minister and forum co-chair, explained that global connectivity extends to digital infrastructure, urging countries to keep the Internet a single open and secure platform through which information can be freely exchanged.
   
• The Belt and Road Initiative: Speakers emphasized the potential of Xi Jinping’s landmark foreign policy initiative to spur development and advance connectivity between China, neighboring countries, and overseas markets. Rudd pointed out that many Western observers do not yet understand China’s signature drive for infrastructure investment and connectivity and that China should continue to inform the international community about the policy’s objectives and details. Drawing on Guangdong’s track record of economic vibrancy, Party Secretary Hu advocated for building Guangzhou into a key hub on the Maritime Silk Road. Former Greek prime minister and forum co-chair George Papandreou highlighted how Chinese investment has helped revitalize Piraeus, Greece’s largest port, stating that Europe hopes to cooperate with China in implementing the Belt and Road. Speakers agreed that the ambitious initiative is poised to draw the world closer together and promote shared economic prosperity, although they acknowledged that implementing it will be a lengthy, challenging process.

Hu Chunhua

Hu Chunhua is the party secretary of Guangdong Province and a full member of the Central Committee of the Chinese Communist Party. He previously served as the party secretary of Inner Mongolia.

Chau Chak Wing

Chau Chak Wing is the founding chairman of the Kingold Group and the president of the Australia China Friendship and Exchange Association, which served as a co-organizer of the Imperial Springs International Forum.

Li Xiaolin

Li Xiaolin is the president of the Chinese People’s Association for Friendship with Foreign Countries, which served as a co-organizer of the Imperial Springs International Forum.

Kevin Rudd

Kevin Rudd served as Australian prime minister and foreign minister. He is currently president of the Asia Society Policy Institute, a senior fellow at the Harvard Kennedy School, and a distinguished fellow at the Paulson Institute. He is a co-chair for the Imperial Springs International Forum.

Carl Bildt

Carl Bildt was Sweden’s foreign minister from 2006 to 2014, and was prime minister from 1991 to 1994, when he negotiated Sweden’s European Union (EU) accession. He also served as a UN special envoy to the Balkans in the late 1990s. He is a co-chair for the Imperial Springs International Forum.

Felipe Calderón

Felipe Calderón was the president of Mexico from 2006 to 2012. Prior to that, he served as secretary of energy, a federal congress member, and secretary-general of Mexico’s National Action Party (PAN). He is a co-chair for the Imperial Springs International Forum.

George Papandreou

George Papandreou was the prime minister of Greece from October 2009 to November 2011 and previously served as the country’s foreign minister from 1999 to 2004. He is currently president of the Socialist International and a member of the Hellenic Parliament. He is a co-chair for the Imperial Springs International Forum.

Romano Prodi

Romano Prodi was the prime minister of Italy from 1996 to 1998 and the president of the European Commission from 1999 to 2004. He previously served as Italy’s minister of industry from 1978 to 1979. He is a co-chair for the Imperial Springs International Forum.

Marty Natalegawa

Marty Natalegawa served as the foreign minister of Indonesia from October 2009 to October 2014. Prior to that, he was Indonesia’s permanent representative to the UN for two years. He is an adviser for the Imperial Springs International Forum.

Terje Rød-Larsen

Terje Rød-Larsen is the president of the International Peace Institute, a think tank affiliated with UN headquarters in New York. Prior to that, he served as UN under-secretary general in various positions involved with negotiations between Israel and the Palestinian Liberation Organization. He is an adviser for the Imperial Springs International Forum.

Although China’s investment-driven development model has led to rapid growth, in recent years it has produced diminishing returns. Government investment and stimulus spending has also contributed to overcapacity in Chinese industries such as steel, cement, and construction. In order to ensure sustainable growth over the long term, China must transition to a new economic model.

At the 2015 Imperial Springs International Forum, Carnegie–Tsinghua’s Paul Haenle moderated a discussion with Liu Ke and Liu Ge about how China’s economic transition is altering investment prospects in China, particularly in emerging sectors such as clean energy technologies. 

Discussion Highlights

• Modernizing Despite Resource Constraints: Given China’s massive population of roughly 1.4 billion people, one panelist noted that the country’s efforts to respond to citizens’ growing material demands must be balanced with the country’s finite resources. He observed that the West has had over a century to develop industrial knowledge and technical prowess to allocate resources efficiently and anticipate future growth trends, whereas China’s modernization has occurred far more rapidly. As a result, China’s regulatory capacity remains limited. A panelist suggested that viewing development in terms of quality of life rather than growth for its own sake may help China to modernize in a more sustainable fashion.
   
• Industries in Transition: One panelist said that some Chinese companies and investors seem to have underestimated the amount of time it will take for China to restructure its economy. He pointed out that some Chinese companies grew accustomed to profitability in specific markets and have struggled to adapt to evolving market conditions. For example, he cited a railway-car producer that enjoyed high sales volumes for several years. As labor costs rose and sales declined, though, it did not shift production until it was too late. When they tried to produce transport trucks instead, they struggled to adjust to the high technological and safety demands of a new industry. One audience member suggested that simplified bankruptcy regulations may help Chinese firms to reallocate capital and labor more efficiently as some firms fail and new ones emerge.
   
• Responding to Trade Shifts: One panelist asserted that many Chinese officials and business leaders were surprised that the United States and the other eleven Asia-Pacific countries negotiating the Trans-Pacific Partnership (TPP) trade agreement were able to reach a deal. While Chinese experts have different opinions about how this development will affect China, some believe that the TPP is a way for foreign firms to gain a competitive edge over Chinese counterparts, pointing out that countries less developed than China—including economic competitors like Vietnam—are part of the agreement. This same panelist acknowledged that it would be difficult for China to join TPP in the short term, but that China should maintain a positive outlook on trade.
   
• Opportunities in the Energy Sector: Panelists agreed that China’s energy sector offers abundant opportunities for investment despite the country’s slower economic growth rate. This sector is so vast and diverse that no single energy source is likely to dominate the market. One panelist suggested that China’s energy demands are gradually shifting away from coal and oil due to the pressures of climate change, as reflected in President Xi Jinping’s recent national cap and trade policy announcement. He suggested that China’s use of liquid natural gas will continue to grow gradually, opening up opportunities for businesses to help create a more flexible transport system by making pipelines, tankers, and other equipment. The panelist also suggested that nuclear energy will continue to play a key role, particularly if innovative solutions are found to the issues of safety and waste disposal. Renewable solar, wind, and hydropower technologies will play a limited role as they still account for a relatively small share of China’s energy production.

Paul Haenle

Paul Haenle is the director of the Carnegie–Tsinghua Center based in Beijing, China. Prior to joining Carnegie, he served from June 2007 to June 2009 as the director for China, Taiwan, and Mongolian Affairs on the National Security Council staffs of former president George W. Bush and President Barack Obama.

Liu Ke

Liu Ke is vice president of government relations and technology collaboration in China for Haldar Topsoe, an industry leader in clean energy technology. He is also a partner at the venture capital firm Enverra Capital and serves as a member of the Carnegie–Tsinghua Center Advisory Council.

Liu Ge

Liu Ge is a senior CCTV reporter, economic commentator, and author specializing in finance. He previously served as the editor-in-chief of two programs on the CCTV finance and economics channel (CCTV 2): “Dialogue” and “Chinese Finance Report.”

The Belt and Road Initiative, or New Silk Road Initiative, is a major foreign policy priority put forth by Chinese President Xi Jinping to bring greater development and connectivity to the countries of Asia, Europe, the Middle East, and Africa. The New Silk Road Initiative involves large-scale Chinese investment in infrastructure projects across Central, South, and Southeast Asia, including roads, rail, ports, pipelines, logistics, telecoms, IT, and industrial capacity. This initiative is expected to be a vital source of investment for developing countries in these regions, although questions remain about how it will be implemented successfully.

Carnegie–Tsinghua’s Paul Haenle moderated a panel of Chinese and international experts to analyze the cultural and strategic motivations behind China’s Belt and Road Initiative as well as the opportunities and challenges that the policy raises for China and the international community.

Discussion Highlights

• Rooted in Chinese Cultural Values: Panelists observed that President Xi’s Belt and Road Initiative evokes the ancient trade route as a symbol of shared prosperity and peaceful cooperation. One panelist pointed out that there had been discussion of reviving these trading routes since the 1980s, although the plan did not receive government support until Xi Jinping announced the official policy in the fall of 2013.  Another panelist asserted that the Belt and Road Initiative reflects traditional Chinese values of harmony and peaceful coexistence, similar to the famous maritime voyages of the Ming dynasty figure, Admiral Zheng He.  
   
• Motivations and Strategic Interests: One panelist described the initiative as China’s way of promoting shared economic prosperity and cooperation with its neighbors and advancing the concept of a community of common destiny that benefits all countries involved. Other panelists noted that the policy also aims to fulfill other Chinese objectives, such as linking with markets for its manufactured goods, transferring overcapacity in construction-related industries, internationalizing the renminbi, and using economic development to address regional security concerns. 
   
• Large-Scale Ambitions and Investment: Participants agreed that the Belt and Road Initiative has an incredibly ambitious agenda with the potential to profoundly change the world even if it is only partially implemented. One panelist noted the plan’s massive scope—linking three continents populated by 4.4 billion people who account for a third of global GDP. As another participant pointed out, the Chinese Academy of Social Sciences estimates that the initiative will deploy up to $6 trillion in investment when the resources of the China Development Bank, the China Exim Bank, and a unit of China’s sovereign wealth fund called CIC Capital are counted alongside those of the Silk Road Fund and the Asian Infrastructure Investment Bank. 
   
• Responses of Other Major Powers: The panelists agreed that the success of the Belt and Road Initiative will greatly depend on the reactions of other regional countries. Some panelists maintained that the United States welcomes Chinese infrastructure investment in Central Asia, although many in Washington remain uncertain about China’s overall strategic intentions. Associating the Belt and Road policy with the Russian-led Eurasian Economic Union, meanwhile, has helped China mitigate Russia’s misgivings about its influence being reduced in Central Asia. Another panelist observed that India’s reaction is also mixed—an economic corridor through Bangladesh and Myanmar seems mutually beneficial, but growing Chinese investment and influence in Sri Lanka and Pakistan has raised concerns. 
   
• A Long-Term Strategy Underway: Panelists acknowledged that despite its bold agenda, the Belt and Road Initiative will take years or even decades to be fully implemented. One participant asserted that the policy is an opportunity for China and neighboring countries to understand each other better, but he conceded that this process will be a lengthy one. Another panelist pointed out that the macroeconomic contours of the initiative will take many years to play out, especially China’s attempt to export its construction industry’s surplus supplies of steel and cement. Participants agreed that China will need to demonstrate patience and resolve as it deepens its involvement in challenging environments, particularly in Central and South Asia. 

Paul Haenle

Paul Haenle is the director of the Carnegie–Tsinghua Center based in Beijing, China. Prior to joining Carnegie, he served from June 2007 to June 2009 as the director for China, Taiwan, and Mongolian Affairs on the National Security Council staffs of former president George W. Bush and President Barack Obama.

Gu Jianqing

Gu Jianqing is the chairman of Guangzhou Daily Media as well as the party secretary of the Guangzhou Daily. He has written several books about China’s economy, the Maritime Silk Road, and sustainable development.

Daniel Markey

Daniel Markey is a senior research professor at Johns Hopkins University’s School of Advanced International Studies (SAIS). He is also the academic director of the SAIS Global Policy Program and an adjunct senior fellow for India, Pakistan, and South Asia at the Council on Foreign Relations.

Andrew Small

Andrew Small is a transatlantic fellow with the German Marshall Fund’s Asia program, which he established in 2006. His research focuses on U.S.-China relations, Europe-China relations, Chinese policy in South Asia, and broader developments in China’s foreign and economic policy.

Yao Yao

Yao Yao is currently the director of research at the China Public Diplomacy Association. He also oversees the Center for National Soft Power Research at China Foreign Affairs University, a national-level think tank affiliated with China’s Ministry of Foreign Affairs.

Asia-Pacific nations share the goal of preserving peace and prosperity, but countries have different ideas about how to achieve this goal. Chinese President Xi Jinping has proposed that Asian security be addressed by Asian countries through an institutional mechanism based on “common security” and “win-win cooperation.” Meanwhile, the United States sees its security presence and regional partnerships and alliances as key factors underwriting regional peace and prosperity. 

Ian Storey moderated a panel discussion between Chinese and international experts about the security challenges facing the Asia-Pacific and the prospects for forming a regional security architecture that can manage issues such as maritime territorial disputes, strategic stability, and nontraditional security challenges. 

Discussion Highlights

• Trust Deficits and Security Challenges: Panelists agreed that maintaining peace and security in the Asia-Pacific is in the interest of all countries involved. They pointed out that many countries in the region have outstanding territorial disputes or long-standing security concerns, such as the divided Korean peninsula, maritime disputes in the East and South China Seas, and tensions between India and Pakistan.  Participants suggested that states must rely on clear-headed diplomacy and a commitment to settling disputes peacefully so as to avoid conflict.
   
• A Viable Regional Security Architecture: In light of protracted regional security concerns, participants agreed that developing a more comprehensive regional security framework would be an important sign of progress. Their views on the shape of this architecture, however, were not uniform. Some panelists pointed to ASEAN as a venue for discussing policy coordination and defusing tensions in Southeast Asia, suggesting that ASEAN could serve as a foundation for a more inclusive and comprehensive institutional mechanism patterned after ASEAN+3 dialogues or the East Asia Summit. Other panelists viewed ASEAN as a largely consultative body that may not be ready to actively address the region’s complex security challenges. 
   
• Nontraditional Security Challenges: Although traditional security issues and state-level military strategy tends to attract analytical attention, participants acknowledged that nontraditional security threats such as climate change, terrorism, natural disasters, and drug trafficking must also be addressed. They noted that climate change is an issue that provides an opportunity for U.S. and Chinese global leadership at the UN Climate Change Conference in Paris later this year. One panelist pointed out that disaster relief and search-and-rescue missions are an opportunity for countries to cooperate and build trust, particularly in a region that experiences frequent typhoons and earthquakes. 
   
• Regional Power Through Economics: Participants observed that trade volumes in the Asia-Pacific continue to grow, prompting further economic integration that may serve as an important counterbalance to regional security concerns. One panelist asserted that many regional actors have discovered that focusing primarily on economic power has yielded more long-term success than emphasizing military affairs. Panelists observed that the economic strength of countries like the United States, China, Japan, and South Korea demonstrates that the path to national power in the twenty-first century is to prioritize economic growth over military hardware.  Given the regional importance of economics, participants suggested that countries should strive to make institutional agreements such as the Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership complementary rather than competitive.
   
• A Gradualist Approach: Given the complexity of the region’s security challenges, panelists suggested that an incremental approach likely will have the highest chances of success. One panelist suggested that both China and the United States take small steps to improve the region’s security environment: China could settle one relatively minor territorial dispute with South Korea and that the United States could roll back its surveillance activities along China’s coastline. Participants acknowledged that trust will only develop gradually as countries cooperate with each other more frequently in concrete ways.

Ian Storey

Ian Storey is a senior fellow at the ISEAS Yusof Ishak Institute (formerly known as the Institute of Southeast Asian Studies) in Singapore. He specializes in Asian security issues, with a focus on Southeast Asia.

He Yafei

He Yafei is the vice minister of the State Council’s Overseas Chinese Affairs Office. He previously served as representative and ambassador of the Permanent Mission of China to the UN Office at Geneva.

Ju Mengjun

Ju Mengjun is a senior journalist and the president of the Xinhua News Agency’s Asia-Pacific Regional Bureau. He previously served as the bureau’s deputy chief editor from 2000 to 2009.

Marty Natalegawa

Marty Natalegawa served as the foreign minister of Indonesia from October 2009 to October 2014. Prior to that, he was Indonesia’s permanent representative to the UN for two years. He is an adviser for the Imperial Springs International Forum.

William Overholt

William Overholt is a senior fellow at Harvard’s Asia Center and the Kennedy School of Government. He previously served as the Asia policy distinguished research chair and director of the Center for Asia-Pacific Policy at the RAND Corporation.

Over the past few decades, rapid economic growth and expanding global interests have driven China to take on a greater leadership role in the world, as the country seeks to shape the international order to better reflect its own interests. Meanwhile, the international community is encouraging China to take further steps to contribute more to public goods and make progress in becoming a ‘responsible stakeholder.’ 

Former Australian prime minister and ISIF co-chair Kevin Rudd moderated a panel of former world leaders on how China’s rise is affecting global governance. They made suggestions about how China and the international community can work in concert to promote peaceful outcomes to existing disputes and conflicts and ensure that the global order reflects the complex realities of twenty-first century policy challenges.

Discussion Highlights

• World Reacts to China’s Rise: Panelists asserted that how China rises and how the world responds to this global shift will be a core dynamic of twenty-first century international politics. They suggested that the relationship between China and the United States reflects the Thucydides trap, a historical pattern where conflict becomes more likely when an established power perceives a rising power to be contesting its leading global position.  Many experts do indeed seem to view China’s rise as an impetus that will prompt inevitable changes to—or even challenge—the post-World War II global order. To minimize the risk of conflict, participants suggested that the international community must recognize China’s growing capabilities and ambitions as a natural phenomenon, which must be reconciled with and integrated more deeply into the current world order.
   
• Addressing Maritime Territorial Disputes: Panelists acknowledged that resolving maritime disputes in the South China Sea between China and countries like the Philippines and Vietnam will likely require long-term efforts and deft diplomacy. Although China is far larger and more powerful than its interlocutors, panelists recommended that China act with restraint and recognize that the international community has an interest in maintaining freedom of navigation in the South China Sea. Despite their different positions, it would be constructive for China and other countries to agree on a code of conduct to guide their actions in the region, participants conclude.
   
• Security Through Economic Integration: Panelists discussed what principles from European integration can be applied to security tensions between major Asian powers such as China and Japan or India and Pakistan. Some of them pointed out that—like the modern-day Asia-Pacific—Europe was plagued by bitter, centuries-long divisions even in the immediate aftermath of World War II. They asserted that the regional architecture of the European Union has enhanced the security of over 100 million Europeans in 28 countries. Some panelists suggested that Asian countries should find more ways to advance economic interdependence as a way to improve security as a supplement to military deterrence. 
   
• Countries Large and Small: Panelists considered ways in which large countries like China and the United States can interact with small countries in constructive ways. They suggested that large countries must learn to better exercise restraint and build shared interests with smaller neighbors. In today’s globalized world, all countries—regardless of size—must be taken into account when making foreign policy decisions, one panelist pointed out. Participants concluded that trust among countries—particularly between large and small ones—is an ongoing process that requires contributions from both sides. 
   
• Blurred Policy Lines: Panelists observed that policymaking in a globalized world has become increasingly complex. They noted that the number of stakeholders seeking a voice in foreign policy making has multiplied to include not only diplomats, multilateral actors, and national government officials, but also nongovernmental organizations, the news media, and local government officials. Participants also pointed out that public policymaking has taken on a more international dimension, as the energy, environmental, monetary, and immigration policies of individual countries affect conditions in neighboring countries more and more. 

Kevin Rudd

Kevin Rudd served as Australian prime minister and foreign minister. He is currently president of the Asia Society Policy Institute, a senior fellow at the Harvard Kennedy School, and a distinguished fellow at the Paulson Institute. He is a co-chair for the Imperial Springs International Forum.

Carl Bildt

Carl Bildt was Sweden’s foreign minister from 2006 to 2014, and was prime minister from 1991 to 1994, when he negotiated Sweden’s European Union (EU) accession. He also served as a UN special envoy to the Balkans in the late 1990s. He is a co-chair for the Imperial Springs International Forum.

Felipe Calderón

Felipe Calderón was the president of Mexico from 2006 to 2012. Prior to that, he served as secretary of energy, a federal congress member, and secretary-general of Mexico’s National Action Party (PAN). He is a co-chair for the Imperial Springs International Forum.

George Papandreou

George Papandreou was the prime minister of Greece from October 2009 to November 2011 and previously served as the country’s foreign minister from 1999 to 2004. He is currently president of the Socialist International and a member of the Hellenic Parliament. He is a co-chair for the Imperial Springs International Forum.

Romano Prodi

Romano Prodi was the prime minister of Italy from 1996 to 1998 and the president of the European Commission from 1999 to 2004. He previously served as Italy’s minister of industry from 1978 to 1979. He is a co-chair for the Imperial Springs International Forum.

Marty Natalegawa

Marty Natalegawa served as the foreign minister of Indonesia from October 2009 to October 2014. Prior to that, he was Indonesia’s permanent representative to the UN for two years. He is an adviser for the Imperial Springs International Forum.

Terje Rød-Larsen

Terje Rød-Larsen is the president of the International Peace Institute, a think tank affiliated with UN headquarters in New York. Prior to that, he served as UN under-secretary general in various positions involved with negotiations between Israel and the Palestinian Liberation Organization. He is an adviser for the Imperial Springs International Forum.

After over three decades of double-digit annual GDP growth, China’s economy has entered a period known as the ‘New Normal,’ characterized by more moderate GDP growth and efforts to transition to a development model based on innovation and domestic consumption rather than state-led investment and export manufacturing. The country’s previous development model has produced diminishing returns, prompting a series of reforms that includes liberalizing interest rates and financial markets, adjusting revenue sharing between the central and local governments, and restructuring state-owned enterprises. The success of these measures will help determine how favorable China’s economic prospects will be going forward. 

In a panel moderated by Andrew Browne, Chinese and international experts discussed China’s economic reform agenda and the country’s slower rate of economic growth under the ‘New Normal.’ They predicted how the downturn of the Chinese stock market and policy changes like internationalizing the renminbi and opening financial markets will affect China’s economic future and the country’s relationship with the global economy. 

Discussion Highlights

• Shifting Economic Landscape: China is restructuring its economy away from investment-heavy industrial manufacturing toward high-tech innovation and domestic consumption. One panelist observed that the effects of this shift will be felt differently in high-tech hubs like Shenzhen and in industrial centers like Liaoning. Panelists added the transition is not likely to be an easy one. Producer and consumer price indexes have been falling for the past few years and the 30 percent drop in China’s stock market has made investors cautious. However, they added, the market was still valued about 150 percent higher than it had been a year before the downturn began. 
   
• Pathway to Diversified Investment: Panelists agreed that China’s efforts to diversify and increase outward overseas investment will deeply impact the world. One participant noted that China’s exceptionally high savings rate and its state-led banking sector have made the country’s investors more willing to fund long-term projects, such as infrastructure, than those from other countries. Panelists pointed out that China’s outbound investment is currently about $100 billion annually, and there is ample room for future growth. They also predicted that China’s outbound and inbound investment is likely to reach parity in the coming years with outbound capital eventually overtaking inbound.  Finalizing a bilateral investment treaty with the United States will be an important milestone, panelists explained, because it will then be easier for China to negotiate similar treaties with other countries down the road. 
   
• Internationalizing the Renminbi: Participants pointed out that the renminbi has appreciated in value by about 30 percent since 2005, suggesting that its 3 percent devaluation in August was comparatively modest, albeit unexpected. They noted that the renminbi already ranks fourth among global currencies as a means of valuing trade transactions, a role that China hopes to continue to expand. Beijing also wants the International Monetary Fund to include the renminbi in its Special Drawing Rights, a supplementary international reserve asset that only includes fully convertible currencies, panelists said. One participant acknowledged that both ways of strengthening the renminbi’s international role are desirable, but cautioned that further reforms to China’s financial markets are needed before these goals can be reached.
   
• Global Reactions: In the past decade, China has surpassed France, the UK, and Japan to become the world’s second largest economy, panelists said. Unsurprisingly, countries around the world have closely followed developments in China’s economy. Major manufacturing exporters such as Germany are adjusting to China’s slowing economic pace after decades of double-digit export growth.  Commodity exporters, such as Australia and Brazil, are concerned that flagging Chinese demand for oil, iron ore, and other resources will negatively impact their own economic climates. Meanwhile, the U.S. Federal Reserve has held off raising interest rates, at least in part due to less rapid growth in China. 
   
• A New Economic Paradigm: As China’s economy redirects toward innovation and consumption, panelists predicted that the government would accelerate the pace of reforms at the Communist Party Central Committee’s fifth plenary meeting later this month. They observed that regulatory, pricing, financial, and state-owned enterprise reforms are already underway, opening up new opportunities and challenges for firms operating in China. One participant pointed out that there is not a mechanistic relationship between reforms and slower economic development, suggesting that innovation may be an engine for future growth. Panelists acknowledged that China remains a developing country and will encounter challenges along the way, but they were confident that the government remains committed to its reform agenda. 

Andrew Browne

Andrew Browne is a senior correspondent and columnist for the Wall Street Journal. He previously served as Asia-Pacific news editor for Reuters. He has over twenty years of experience running news bureaus throughout Asia.

Ding Yifan

Ding Yifan is a senior fellow and the deputy director of the Institute of World Development under the State Council’s Development Research Center. He has served as a visiting scholar at Johns Hopkins University’s School of Advanced International Studies.

Jiang Yong

Jiang is the director of the Center for Economic Security Studies at the China Institutes of Contemporary International Relations. He is also a research fellow at the Center for National Strategic Studies. His research focuses on economic security and theories of global economics.

Alexa Lam

Alexa Lam is a professor of law at the University of Hong Kong. She previously served as the deputy chief executive officer of the Hong Kong Securities and Futures Commission. She is one of the principal architects of opening capital markets and renminbi investment products.

Vikram Nehru

Vikram Nehru is a senior associate in the Carnegie Asia Program. An expert on development economics, growth, poverty reduction, debt sustainability, governance, and the performance and prospects of East Asia, his research focuses on the economic, political, and strategic issues confronting Asia, particularly Southeast Asia.

Yao Yang

Yao Yang is the dean of the National School of Development at Peking University. He is also a professor and the director of the China Center for Economic Research. His research focuses on China’s economic growth, institutional change, and rural development.