What Top Delegates Are Saying About Trade at the New Economy Forum

(Bloomberg) -- Trade tensions, a shaky outlook for the world economy and the risk of a catastrophic conflict dominated discussions on the first day of the Bloomberg New Economy Forum in Beijing.

From swirling geopolitical risks to climate change, delegates painted a picture that was perhaps best summed up as “fragile” by Standard Chartered Chief Executive Officer Bill Winters.

While former U.S. Secretary of State Henry Kissinger said there are major differences between today’s China and U.S. tensions compared with the original Cold War, he also laid out why the world needs to learn from history if it is to avoid future conflict.

Here’s a selection of remarks from some of those present:

Trade

China’s Vice President Wang Qishan, who’s one of the country’s best known economic reformers, warned in the opening speech against a Cold War mentality and zero-sum game, without directly referencing the U.S. or President Donald Trump. He also reiterated an argument that China backs globalization and multilateralism, even amid criticism it blocks foreign competition in its economy.

Yet in an indication of hardening attitudes in the U.S., Charlene Barshefsky, who negotiated China’s entry into the World Trade Organization under President Bill Clinton, accused the world’s second-biggest economy of mercantilism.

“China’s shift from decades of market-opening and reform to mercantilism began in 2006 with an indigenous innovation campaign, and accelerated with the global financial crisis,” she said. “Today, the China model fuses the party, resurgent state planning, massive subsidies, protectionism and IP theft -- all turbo-charged by scale.”

Barshefsky, who is now senior international partner at Wilmer Hale, said there’s little evidence that China will “establish a genuinely reciprocal basis for trade, technology, or investment that leads to substantially different market outcomes.”

Throwing Punches

Ronnie Chan, Hong Kong-based chairman of Hang Lung Properties and a well known commentator on China issues, had this message for trade hawks in Washington.

“You threw 120 punches toward the Chinese, they can come back with 118. And the ability and the preparedness to withstand blows in China is far higher than in the United States,” he warned. “So, yeah, you win 120-118 say, but you can hardly take those 118 punches for political reasons or societal reasons. I think America at the end will have to learn to work with China.”

Bridgewater Associates founder Ray Dalio echoed the cautious tone, comparing the current global economy to conditions in 1944, with China on the rise and the U.S. in a state of relative decline.

Lessons from History

A hot war between the U.S. and China would be a catastrophe even worse than Europe experienced in the 20th century, with relations between both especially complicated by the deep economic linkages, Kissinger warned.

“That makes it, in my view, especially important that a period of relative tension be followed by an explicit effort to understand what the political causes are and a commitment by both sides to try to overcome those,” he said. “It is far from being too late for that, because we are still in the foothills of a cold war.”

Later in the day, former U.S. Treasury Secretary Henry Paulson warned of the perils of decoupling. He called on China to open more and said the U.S. should resist the temptation to delist Chinese firms from U.S. exchanges, calling it a “terrible idea.” Both countries should determine the rules of the road for high-end technology such as 5G, he said.

“There will be some natural decoupling,” Paulson said. “But the delusions of a wholesale, comprehensive decoupling and an economic iron curtain will leave our countries, and the world, worse off. We need to avoid that outcome.”

Microsoft Corp. founder Bill Gates said he was “more passionate about the value of engagement than ever” and worried about those promoting a U.S.-China decoupling. Still, he didn’t see how such bifurcation would be feasible in the technology sphere, where research is published across geographical boundaries.

“AI is very hard to put back in the bottle, and whoever has the open system will get so vastly ahead” of those who try to close it, Gates said.

Singapore Senior Minister Tharman Shanmugaratnam said “the central problem” was managing the U.S.-China strategic rivalry, with “the possibility of bifurcated supply chains being the most important dimension of that.”

Picking Sides

DBS Group CEO Piyush Gupta was among those downplaying the notion that economies across Asia and the globe would have to pick sides in the U.S.-China trade war, predicting instead that most would be more “pragmatic” in drafting partners and alliances.

“I think they will be issues-based,” particularly as smaller countries cannot afford to choose with their capital and trade “tied to bandwagons of both large economic entities,” Gupta said.

African countries that have a slew of business with both the U.S. and China also will base partnerships on good deals rather than ideology, said Zouera Youssoufou, managing director of the Dangote Foundation. “It’s going to have to be a mix of both that Africa will have to deal with,” she said.

Asian Infrastructure Investment Bank President Jin Liqun warned against getting too distracted by the strategic U.S.-China rivalry, at risk of not enacting key structural reforms that could help avert the next global downturn.

The New Economy Forum is being organized by Bloomberg Media Group, a division of Bloomberg LP, the parent company of Bloomberg News.

--With assistance from Charlie Zhu.

To contact the reporters on this story: Enda Curran in hong kong at ecurran8@bloomberg.net;Michelle Jamrisko in Singapore at mjamrisko@bloomberg.net

To contact the editors responsible for this story: Malcolm Scott at mscott23@bloomberg.net, Daniel Ten Kate

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