Green Economy, Digital Economy, and New Quality Productive Forces An Interview with Charles Liu Yangsheng

May 21, 2024

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TIO

The concept of "new quality productive forces" has gained significant attention both domestically and internationally. How would you interpret this concept?

Liu

This concept can be interpreted from various perspectives. Firstly, since "productive forces" are related to manufacturing, the idea of "new quality productive forces" means enhancing manufacturing efficiency to improve production capacity. This involves intelligent production, automation, new materials, and so on.

Additionally, "new quality" embraces green concepts such as environmental protection and energy saving. From a macro perspective, it also refers to improving the efficiency of the entire supply chain, by introducing new materials and new technologies and optimizing operational efficiency. Ultimately, the goal is to increase production efficiency, reduce production costs, and offer enhanced experiences for humanity while conserving resources.

TIO

To implement this initiative, the Chinese government has outlined a general direction and focused on certain sectors including the digital economy. Also, it has been 10 years since China proposed the Belt and Road Initiative, and an important part of it is the Digital Silk Road. How do you envision new quality productive forces contributing to the digital economy?

Liu

We should take two aspects into consideration. First, we should acknowledge the fact that Belt and Road countries are at different stages of development. For less developed countries, the Belt and Road Initiative has provided crucial infrastructure over the past 10 years. Meanwhile, more advanced countries are focusing on digital infrastructure, encompassing technologies like 5G, the Internet of Things (IoT), and advanced data analytics and algorithms, and they are working with China. For example, the United Arab Emirates (UAE) has established a university dedicated to AI and is the only country in the world that has a governmental AI ministry. These advancements also hinge on robust infrastructure, including extensive data centers, sufficient power generation, and affordable electricity. Therefore, China's cooperation with Belt and Road countries in enhancing infrastructure could greatly enhance productivity and innovation in these regions.

Second, the digital yuan. The increasing trade volume between the Middle East and China highlights the significance of adopting the digital yuan. If the digital yuan is realized, there is no need to convert yuan into dollars, and then convert dollars into local currencies, leading to lower costs and higher efficiency. Thus, the digital yuan plays a crucial role in the digital economy. Qatar has established a clearing center for the Chinese yuan; the Central Bank of the UAE (CBUAE) and the People's Bank of China (PBC) are working together to test means of circulation for the digital yuan. In addition, ASEAN countries are also cooperating with China in this realm; there are ongoing discussions between China and the central bank of Singapore regarding the development of the digital yuan. So in the next stage, the digital yuan will become part of the digital infrastructure, and some of the more advanced Belt and Road countries have been moving in this direction.

TIO

As you mentioned, the "new quality" framework also endorses green concepts. As Chinese companies expand their global footprint, what are your thoughts on how Chinese companies are navigating and implementing corporate social responsibility (CSR) and environmental, social, and governance (ESG), as advocated by the international community?

Liu

I may hold a different opinion from most on this matter. The concept of ESG was initially proposed by Western governments to criticize and discredit China. They criticized China for pollution without mentioning how much damage has been done to the atmosphere by the Western industrial revolution, spanning over two centuries. However, China has done a very good job of managing pollution, as seen in Beijing's improved air quality over recent years. So later, the narrative around ESG shifted. Instead of being a tool for discrediting China, it now serves as a "common value" that China must follow to access Western capital markets and is proposed by Western accounting and law firms so that in the end, they gain profits by providing consulting services. Therefore, while I strongly support the green economy and have made investments in it for a decade, I do not fully agree with the frameworks of ESG and CSR.

The standards set by Western countries over the past two centuries do not fully apply to countries at different stages of development. For instance, the United States has been criticizing China for providing foreign aid in building thermal power plants in developing countries and causing pollution. However, many of these countries are unlikely to have enough capital to invest in non-thermal power generation without aid. It would be unethical to deny the people of India and Africa electricity because they lack the resources to develop nuclear power. Indeed, a green economy is crucial for the world and should be actively pursued, as climate change is a reality that poses significant dangers to our planet, but the specific standards are subject to debate.

TIO

Some of the commentary on new quality productive forces in Western media has been negative. One of the criticisms raised is that China's new quality productive forces could lead to overcapacity. How do you interpret and assess this view?

Liu

Just like how ESG was initially proposed, any Chinese initiatives would quickly meet with crackdowns led primarily by the US. From the Western paradigm, as long as China increases production capacity, reduces costs, increases profits, and expands market share, China is causing "overcapacity." For example, China's electric vehicles (EVs), one of China's globally competitive "new three" products and a significant manifestation of new quality productive forces, are experiencing the most severe scrutiny. However, China's share in the US EV market is 0%, and in the European EV market, China stands at 8%. This is the result of tariffs. The United States has imposed a 27.5% tariff on Chinese EVs, and Europe is also ready to impose strict tariffs. Because China's EVs are far ahead in quality, price, and other aspects, the US and Europe cannot compete and can only resort to protectionist measures.

So it is absurd to accuse China of overcapacity. Even with the 27.5% tariff imposed by the US, China's production capacity may still struggle to keep up with the aggressive global market demand. Take the newly launched Xiaomi's electric car as an example; it is much superior to that of Europe and the US in terms of pricing and relative performance.

When China proposed the "Made in China 2025" strategic plan, the United States began to suppress China in various fields, with methods including a trade war, a science and technology war, and now a financial war. This suggests that the "overcapacity" narrative is indeed part of a broader strategy aimed at containing China's development.

TIO

Despite the negative comments, the introduction of new quality productive forces does interest governments, businesses, and economists worldwide, including those in Western countries. How do you expect China's development of new quality productive forces to boost foreign investment confidence and promote cooperation with other countries and regions?

Liu

There are two aspects involved. First, what implications does this concept hold for other countries, particularly concerning its impact on foreign capitalists and large corporate groups? Despite Western reports last year of a decline in foreign investment in China, analysis reveals a nuanced picture. Whilst financial capital investment may have decreased, industrial capital investment has seen an increase. For example, Germany recorded its highest-ever direct foreign investment into China last year, primarily directed toward manufacturing sectors. The decline in financial capital investment can be attributed to two causes. Firstly, the high interest rate on dollars has incentivized more dollar exchanges, affecting investment patterns. Secondly, the US government has publicly claimed to restrict financial capital investment in Chinese companies, contributing to their financial withdrawals. Overall, regardless of the specific call for new quality productive forces, Chinese industries' high efficiency will continue to attract foreign countries to invest in China's industrial and manufacturing sectors.

Second, opportunities arising from new quality productive forces can be considered from many angles across different industries and fields. For example, ASEAN economies are increasingly integrated into China's economic supply chain, leveraging the economies of scale of China's vast market, instead of pursuing economic decoupling as desired by some Western governments. In the manufacturing sector, no single country can produce an entire cellphone, but a country may produce several components; similarly, no single country can produce an entire electric car, but they may produce some components. Therefore, part of the success of China's supply chain should be credited to ASEAN countries as well as some South Korean and Japanese companies. Their participation contributes to the formation of China's comprehensive, advanced, and highly efficient industrial supply chain. This situation presents a clear opportunity for other countries: aligning with China's development trajectory can lead to a win-win situation.

 

This interview was conducted by Song Xiaofeng, Editor-in-Chief of Taihe Institute.
 

 

Please note: The above contents only represent the views of the author, and do not necessarily represent the views or positions of Taihe Institute.

 

This article is from the April issue of TI Observer (TIO), which focuses on the concept of "new quality productive forces" and tries to interpret its theoretical grounds and strategic importance. If you are interested in knowing more about the April issue, please click here:

http://www.taiheinstitute.org/UpLoadFile/files/2024/4/29/1720023057288b81-e.pdf

 

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