Summer Davos Spotlight:China's Shift to New Economy
The World Economic Forum’s 10th Annual Meeting of the New Champions, also known as Summer Davos, took place from June 26-28 in Tianjin. Themed “The Fourth Industrial Revolution and Its Transformational Impact”, the event attracted more than 1,700 business leaders, officials, and experts from over 90 countries.
As the global economy endures an extended downturn, few were surprised that China’s economy became the focus of the Summer Davos. What is the economic situation in China? How will China conduct its economic transition? What will be the driving forces of China’s development? These questions raised heated discussions between participants of Summer Davos.
China’s New Business Context
With the arrival of the fourth indus-trial revolution against changing international and domestic backdrops, China now faces big challenges such as the growing elderly demographic and loss of labor-cost advantage, noted Ma Weihua, president of China Entrepreneur Club, at a session themed “China’s New Business Context” during the 2016 Annual Meeting of the New Champions.
Ma added that weakness in innovation and technical commercialization is China’s “Achilles’ heel.” “The key is enhancing the quality of GDP through technical innovation, especially in the field of manufacturing,” he opined.
The core of economic reform is to allow the market to determine the allocation of resources, explained Xu Jinghong, chairman of Tsinghua Holdings. “To adapt to the changing world, China must perform constant innovation.”
June 26, 2016: Li Daokui, an eminent economist and director of the Center for China in the World Economy at Tsinghua University, speaks at the Summer Davos Forum. CFP
Summer Davos, themed “The Fourth Industrial Revolution and Its Transformational Impact”, took place from June 26 to 28 in Tianjin. CFPInnovation Highlighted at Summer Davos
China will continue to mold itself into an innovation-driven country using innovative concepts, growing the new economy and fostering new growth, declared Chinese Premier Li Keqiang at the opening ceremony of the 2016 Annual Meeting of the New Champions.
The country’s promotion of entrepreneurship and innovation will amalgamate innovative activities by people from both elite circles and grassroots level, online and offline, as well as business and research institutes, said Li. He also noted that China will continue to promote mass entrepreneurship and “the Internet Plus” initiative to foster new growth engines.
Matthew Prince, CEO of U.S.-based internet company CloudFlare and co-chair of the meeting, highlighted the role of the internet in the fourth industrial revolution. “The power of the internet is to bring people together,” he said. “China today has 25 percent of the world’s internet population, which is making it one of the most creative engines in the world.”
Travis Kalanick, CEO and co-founder of Uber, noted that the prevailing rules, which are mostly designed to protect existing players, are an impediment to innovation. As of how the online cab-hailing industry would change, he said, “I guarantee you that by 2025, you won’t be waving at a car anymore.”
Education is crucial for incubating innovation, stressed Shirley Ann Jackson, president of Rensselaer Polytechnic Institute. She talked about how many Chinese universities are eager to partner and collaborate with universities in the USA and around the world. “Many talents from China share their gifts around the world and bring their talent back to China to lead innovation.”
Financial Innovation as a Growth Driver
Despite worries about China’s surging debts and capital outflow, participants at the Summer Davos remain optimistic about China’s economic outlook, especially in the area of financial innovation.
“The future of financial technology is transformative,” predicted Gregory D. Gibb, co-chairman and CEO of Shanghai Lujiazui International Financial Asset Exchange Co., Ltd. (Lufax) at a session themed Future of Finance in China. “In the future, more capital could be invested in non-government companies and this kind of transformation will make the real economy in China stronger.”
Internet finance is now flourishing in China. Gibb added that over the past five years, some 5,000 new financial technology companies entered the market in China, which has injected a strong momentum into the development of the country’s economy, especially the private sector.
Mio Takaoka, managing director of Japan-based Monex Ventures, believes that China has advantages in terms of promoting innovation in finance. “China has a thriving ecosystem in terms of innovation, second only to Silicon Valley perhaps. There are many people with a global mindset and a lot of entrepreneurial talent. And there are lots of opportunities for companies to bring new technology.”
Responding to concerns about China’s mounting debt, Jia Kang, president of China Academy of New Supply-Side Economics, opined, “We have several billion in debt in stocks, so we need to push forward with structural reform, and the bond market should be given a new high priority.”
Brexit: A Hot Topic at Summer Davos
The news that Britain decided to leave the EU after a recent referendum shocked the world, dominating the opening conversations at the 2016 Annual Meeting of the New Champions.
Some participants expressed their worry about Britain’s decision to leave the EU. “It creates a whole bunch of economic, financial, political and also geopolitical uncertainties,” remarked Professor Nouriel Roubini from New York University.
Considering that Britain is an important trade partner of China, concern about the impact of Brexit is also surging in the East.
However, David Li Daokui, an eminent economist and director of the Center for China in the World Economy, believes that the UK referendum will have a negligible direct impact on China’s economy. “The primary direct impact is reflected in undulations of foreign exchange rates and the flow of international capital, which may result in losses for some Chinese investors in Britain,” he explained.
Chinese Vice Minister of Foreign Affairs Li Baodong called Brexit a shock, but not a crisis. He called on all stakeholders to react calmly and stay united, to restore confidence and market stability. “China would like to see a stable and prosperous Britain and a stable and prosperous Europe,” he said.