The role of development institutions – Valdai Club
The impact of COVID-19 in 2020 on the global economy was unprecedented in history. The global industrial chain and supply chain is in poor circulation, international trade and investment are contracting, the commodities market is turbulent, and risks in areas such as finance are high; with a drop in domestic consumption and investments in all countries, increasing pressure on employment and businesses, major challenges for micro, small and medium-sized businesses. The panic and pessimistic expectations of market participants are difficult to allay completely in the short term.
The vast public health crisis is evolving into a global economic crisis, and no country will be immune. By the time the epidemic broke, the world did not emerge from the shadows of the economic crisis caused by the financial turmoil of 2008, and many issues putting the global economy at risk have not been resolved. thoroughly. Even if COVID-19 did not happen, the global economy would still experience countless fundamental problems with faltering growth. The impact of the pandemic only brings another blow to the vulnerable global economy which faces sluggish demand, excessive debt, de-globalization and other challenges and risks. Thus, the dilemma that the global economy is currently facing cannot be totally attributed to the impact of COVID-19, but in fact due to the fact that human society cannot effectively meet the challenges of economic globalization nor do it. advance the healthy development of economic globalization.
As the COVID-19 pandemic has increased instabilities and uncertainties in the global economy, all countries need openness and cooperation more than ever. History tells us that no matter what risks, disasters, or setbacks humans face, society has always evolved and is destined to evolve. Cooperation for common openness is an important guarantee for humans to move forward. In the special period, efforts should be made to maximize the role of each actor in global governance. With the development of the economy and society, participants in global governance will cover not only sovereign states and international organizations, but also development institutions, multinational corporations and some other private sectors. Faced with the current challenge, we will focus on how to play the role of each country, especially the great powers, the role of international development financial institutions, the World Bank, the Asian Development Bank as well as the New Asian Development and Infrastructure Bank. An investment bank founded in recent years to improve global governance and jointly advance the recovery of the global economy.
It is only by joining forces, strengthening cooperation and communication, and jointly broadening openness that we can tackle risks and challenges together. Without global cooperation, we cannot completely eliminate COVID-19. The pandemic not only rocked the health system and tested the system of governance around the world, but also had a global impact on the global economy. Although economic globalization is difficult to advance and the industrial division of labor and the trade chain are currently threatened with “degeneration”, the general tendency towards openness and cooperation of all countries has not changed. As it deepens, economic globalization binds the interests and destinies of countries around the world more closely than ever, forming a community of shared interests in which everyone is connected to each other. While many problems are not confined to a single country, many challenges cannot be solved by any country alone, but through global cooperation. As one country shares happiness and misfortune with another, no country can be immune from a major crisis, and unity and cooperation will be the inevitable choice in the face of challenges. In the future, all countries of the world will join together and advance common openness for win-win cooperation.
With the great powers playing a leading role, all countries must join hands and advance the common development of the world through common openness and sharing of responsibilities. The global economic landscape and the system of division of labor among the countries of the world have taken shape, with the EU, the United States, Japan and China accounting for two-thirds of the world’s GDP and becoming the centers of the global industrial chain. . Supported by the three main pillars, the global industrial chain also sees increasingly mature regional industrial clusters. Respectively as the centers of Asia, America and Europe, China, the United States and Germany respectively have closed loops of the value chain, while China becomes the hub connecting the value chain in developed countries and that in emerging economies. However, COVID-19 erupted first in these economic powers, which thus see social and economic activities frustrated or even stopped. With more production difficulties, the global industrial chain runs the risk of being broken. The danger was invisible in the financial turmoil of 2008, and needs to be given sufficient attention around the world. The increasingly severe epidemic situation around the world will seriously hamper economic activities and slow the pace of recovery, which could put the sluggish economy into a vicious cycle, trigger a typical economic recession, cause a double dip in the economy. economy and threaten the world economy again.
As a pillar of global governance, development institutions must play their role and promote the recovery of the global economy. Global economic governance involves finance, trade and economic development, the nature of which is to provide international public products. As global or regional development institutions, development finance institutions play an important role in global economic governance, especially in areas such as development assistance and poverty reduction. In the current fight against COVID-19 and on-going efforts to advance economic recovery, development finance institutions will play a greater role as they take on functions such as coordinating various relationships and stabilizing international or regional economic orders. Bilateral aid often causes scattered and chaotic situations, and involves high transaction costs due to information asymmetry. Located at the heart of global or regional aid systems, development finance institutions can use their multilateral aid platforms to concentrate resources and information and thereby reduce the trade cost of aid. Meanwhile, as the pandemic causes an economic recession and inevitably adds to the debt burden of developing countries, development finance institutions must actively coordinate debts between developed and developing countries, and help both sides. to reach consensus. In total, every development finance institution, regardless of the World Bank, New Development Bank, Asian Development Bank or Asian Infrastructure Investment Bank, can take whatever action is needed to help developing countries. hard hit by the pandemic to mitigate the negative influence and accelerate the recovery of the global economy. .
Going forward, each participant in global governance will need to champion the perspective of global governance known as achieving shared growth through discussion and collaboration, reforming the system of global economic governance with a constructive stance and advancing building an open global economy. As global challenges multiply, strengthening global governance and accelerating reform of the global governance system has been a general trend. As more and more problems require solutions worked out by all through negotiation, the establishment of an international mechanism, respect for international rules and the pursuit of international justice have become the consensus of most countries. . Where will human society be heading at this historically critical time? Will we allow unilateralism and protectionism to destroy international orders and rules and plunge human society into obscurity or will we seek good prospects by reforming the system of global economic governance with a constructive stance for take advantage of the advantages and avoid the disadvantages? The answer goes without saying. We will stand on the right side of history. In the future, the world will be united and move towards a common openness characterized by cooperation and joint governance.