Wei Jianguo: De-Americanization and RMB Appreciation in the Post-Covid-19 Era

In the past year, the global economy suffered greatly from the COVCID-19 pandemic, and various conflicts and riots worldwide have sapped people of their confidence. On the contrary, China has taken the lead in economic recovery. According to data released by the National Bureau of Statistics on January 18, China’s gross domestic product (GDP) exceeded 100 trillion yuan for the first time in 2020.

At the same time, China’s foreign trade has performed better than expected. According to the General Administration of Customs, imports and exports achieved positive growth for seven consecutive months starting from June 2020, making China the only economy in the world that achieved positive growth in international trade.

Wei Jianguo, former Vice Minister of Commerce, was interviewed by the magazine “Cover” and answered questions regarding the current economy.

Wei Jianguo expected that China’s GDP growth will be between 8.5% and 9% in 2021, which is far beyond our expectations.

In contrast to other countries, China’s economic performance is admirable. The change of the US president and other incidents have made more people realize the cruel fact that the so-called “American Dream” is quite different from what they expected.

Wei Jianguo told the “Cover” that the United States has fallen and it will be difficult for Biden to restore its former prosperity. In the post-COVID-19 era, there will be a de-Americanization around the world, which will lead to a faster RMB internationalization.

Below is the summary of the interview.

Question: What is the implication of China’s positive growth and one-hundred-billion-yuan GDP amid the COVID-19 pandemic and a global economic recession in 2020?

Wei Jianguo: Obviously, the fact that China’s GDP has reached one hundred billion surprised many people worldwide. Some of them are suspicious of China’s development.

From a global perspective, China’s fast development has laid a great foundation for the global economic recovery in the post-pandemic era. The current global economy is very depressing but China’s economic achievement has brought hope to other countries.

A foreign friend of mine said that the world will rely more and more on China in the future, and China will take a lead in bringing the global economy back on track in the post-pandemic period.

Question: Mr. Ma Jun from the central bank recently proposed that the GDP growth target should be permanently abolished, what do you think of this?

Wei Jianguo: I am afraid I can not agree with this kind of opinion.

At present, China should maintain certain economic indicators because this is beneficial to China’s overall development. In the future, China will move towards a green, coordinated, open and shared economy. The GDP can play a guiding role for local officials and entrepreneurs.

Of course, China will slowly dilute the role of the GDP target and move towards a more scientific, balanced, and coordinated development. At that time, China will focus more on the quality of internal development but this will not happen in one day. Thus, it is difficult for us to to permanently abolish the GDP target in the near future.

Questions: Recently, the IMF predicts that China’s GDP growth will reach 8.1% in 2021, isn’t that too high?

Wei Jianguo: As a result of the COVID-19 pandemic, all European and American countries experienced negative economic growth, and the situation is even worse for some emerging countries. China is the only country with positive growth. In 2020, China achieved positive GDP growth of 2.3% and many people believe that China will take the lead in future economic development.

After the resumption of production, China will launch a full recovery of the entire economy. The industrial chain, supply chain and service chain will go back to normal and even make faster progress.

I think that China’s economy will create a miracle in 2021 and its GDP growth will be between 8.5% and 9%.

Question: In 2020, China’s foreign trade grew against the trend and performed better than expected. A long time ago, you predicted that China’s import and export growth will both turn positive in June 2020, how did you come up with the prediction?

Wei Jianguo: Previously, many people worried about the development of China’s foreign trade, but I was not.

China plays a crucial role in global trade because most of its exports are daily necessities, such as textiles, luggage, and personal protective equipment.

European and American countries experienced a economic halt during the COVID-19 pandemic but China’s economy experienced a quick recovery after the lockdown. As the pandemic worsens, many countries cannot keep up with production but their domestic demand is still increasing. China has the world’s most complete manufacturing system and industrial chain, which has accelerated the circulation of its industrial chain and shortened the production cycle.

Therefore, foreign trade companies do not have to worry about their future. Orders will come one after another, which happened in June 2020. In 2021, 2022, and 2023, China’s foreign trade will develop rapidly and achieve double-digit growth.

With regard to China’s foreign trade, I am a little concerned with the appreciation of the RMB.

After the epidemic, there will be a global de-Americanization and one of the resulting impact is that people begin to distrust the US dollar. In other words, commodities priced in US dollar, including oil and iron ore, will gradually be priced in other relatively stable currencies, such as the RMB.

Of course, the RMB will appreciate faster than before. Currency appreciation is good for foreign exchange reserves, pricing and negotiation. However, the RMB appreciation will make China’s exports less attractive.

The biggest impact of de-Americanization is that RMB internationalization will be accelerated.

Question: On Wall Street, the center of the global capital market, there has been a battle between regular people and large institutional investors. What do you think of this?

Wei Jianguo: This is the inevitable phenomenon in the development of capitalism.

Marx said that the root cause of all crises in the world is nothing more than the poverty of the people and their limited consumption. The poverty and limited consumption of small investors are the causes of this crisis. Obviously, such a crisis broke out first on Wall Street.

In the future, this kind of crisis will continue to occur in capitalist countries such as the United States. Before the last stage of capitalism development, economic crisis will appear and after that the entire system will collapse. The fact that regular investors look to one another for comfort can be seen as a challenge to the current financial system.

Question: Will Biden restore America’s glory?

Wei Jianguo: Nowadays, the United States is like an “unfinished building”, and Biden will continue the work on the incomplete project, which will be a very difficult task.

The United States has fallen, and no matter how hard Biden works, it will be difficult to restore its former glory. Moreover, the way the United States government deal with the COVID-19 pandemic made people realized that the “American Dream” is not like what they thought.

Question: The former US President Trump’s anti-globalization has made many allies feel bad, but now Biden is back with a policy to promote globalization. How will this impact China and the status of its currency?

Wei Jianguo: The new American leadership will carefully consider its relationship with China.

I don’t agree with some experts and scholars that “the United States seems to agree that China is a danger and very few people consider China as a friend”. In fact, the United States also has a positive view of China because of the following reasons.

First, more and more Americans understand that the problems in the United States are not caused by China.

The US has many problems. For example, many industries have hollowed out, the gap between the rich and the poor has widened, unemployment has increased and companies have moved abroad. Consequently, many Americans have started to questions what Trump said before and they are looking for new answers. The answer is that the problems in the US are caused by the US itself, not by China. The US government is slowly learning about the fact.

Second, whether the US admits it or not, China is on the rise and this trend can not be stopped by the US.

China’s economic development is unstoppable. Many American entrepreneurs and farmers have deeply felt it. What will American farmers do if China does not buy American agricultural products? The US can hardly sell all its high-tech products to other markets if China does not buy them.

Last but not least, most of the people in the United States have started to realize that the rise of China will bring greater benefits to the United States, especially the scholars who do not trust Trump, and the medical staff who have been hit hard by the COVID-19 pandemic. They believe that China is on the right path and the plan adopted by the United States ruined itself.

Question: The careful consideration of the US people and government does not mean that China and the US can return to the “honeymoon” period.

Wei Jianguo: Many people hope that the two countries can return to the honeymoon period, but I hold a different view on this. In the next stage, China and the United States will enter a tentative period like dancing the tango.

This means that there is a lot of room for communication between the two parties, which is a rare opportunity. If they have smooth communication, China and the United States will reach agreements on such issues as climate change, fighting the epidemic, and reduce the gap between the rich and the poor.

This window opportunity will not appear until Biden put the COVID-19 pandemic under control and China should send some positive signals during this period by making the following explanations.

First of all, China has no intention to replace the US as the global hegemony, nor does China want to become the hegemony. Secondly, China hopes that the two sides will adopt a non-conflict, non-confrontational approach, and use dialogue to solve problems and achieve mutual benefit and win-win results. Finally, we can sort out the contradictions and make a list of cooperation in green energy, new energy, climate change, and the fight against the epidemic.

Question: Some people believe that the Thucydides trap is unavoidable in the history of mankind, and this is also the case in the competition between China and the United States.

Wei Jianguo: In the global modern history, there were 16 Thucydides trap and emerging powers-related incidents, and 14 of them were solved through war.

The premise that the US-China disputes will not fall into the Thucydides trap in the future is because the two sides will find a common path to avoid this catastrophic situation. The community with a shared future for mankind is to make more people understand that the real enemy facing humanity is pandemics, disasters, climate change, poverty and so on.

Question: We have a good vision, will the US follow our path?

Wei Jianguo: In fact, we need more and better publicity. We should tell the world that the world is a big family and everyone can live a good life.

There are different opinions between China and the United States, but this does not affect the joint development and cooperation between the two countries, nor does it affect the joint creation of a worldwide production chain, supply chain, and service chain.

Moreover, the world can maximize the marginal effects of economics. For example, China needs plenty of mango from Tanzania. The mango can be processed locally into mango juice and transported to China by the most advanced method, which not only saves freight, but also meets China’s needs at a good price. By doing so, we will be able to smoothen the global production chain and match global production factors.

Question: So, we should use the power of the market to combine economic factors, so that people all over the world can benefit from it. This will eventually reduce mutual misunderstanding.

Wei Jianguo: Other countries will enjoy the opportunities brought by China’s development through the Belt and Road Initiative, and have a free ride on China’s development. The establishment of a community with a shared future for mankind will make everyone realize that the world has a common goal, and we have no fundamental conflicts or contradictions with each other.

The use of the so-called nation and human rights by the United States is a kind of double moral standard. Nowadays, more and more people are slowly learning that China is the positive energy for global economic development, the stabilizer of global economy, and the hope of the world economic recovery in the post-pandemic era.

There will be four driving forces for the world economy in the post-epidemic era: machinery manufacturing, high technology, capital, and talent.