China and the U.S. need to work jointly for a global economic order that works more effectively for the interests of both and the world, a former undersecretary of state in the Obama administration said at a forum on Tuesday at the Yale Club hosted by Chinese media group YiCai in New York.
"China is playing a much more active role in the United Nations, and it's playing a greater role in the IMF and the World Bank," said Robert Hormats, Kissinger Associates vice-chairman.
"China has initiated the AIIB (Asian Infrastructure Investment Bank), which is playing a very important role in the East Asia region. China is involved in major trade negotiations with the ASEAN countries and many others," he said.
Hormats said he disagreed with the notion in the U.S. somehow that China wants to undermine the global economic order and what China is doing internationally will cause the global economic order to deteriorate.
"I think that there is a lot of thought being given to the global economic order in Beijing — a lot of planning and a lot of studies going on," said Hormats. "But I don't see China as seeing the destruction or the weakening of the global economic order as being to its advantage.
"China is part of the global economic order; it has a vast array of investment, relationships and trading relationships all around the world," said Hormats.
Thus, he added, China needs some global economic order for its own prosperity to be extended through increased trade and investment with other countries.
China's view of what the future global order looks like might differ from that of the U.S., Hormats said. "But the fact is, if there is no order, if the system deteriorates badly, it doesn't serve the interests of the United States, and it does not serve the interests of an economically expansive and growing China.
"So if we're looking for areas where (the two) countries have a common medium-term interest, not interested in every detail, but the common medium-term interest in preserving an orderly, well-functioning global economic system, China and the U.S. have that," he said.
To avoid adverse effects on both nations stemming from a deteriorating global economic order, the two countries have to try to figure out the broader scale, Hormats suggested.
"The two countries need to find ways of enabling the WTO to work better, of enabling the international monetary system to function well," said Hormats.
"I agree that the notion (China wants to undermine the global economic order) is a false notion," said Yale economist Stephen Roach at the forum.
"But there are some worrisome and destructive forces at work on all sides of the bilateral relationship and the global environment that could lead us to a very unfortunate end," the former chairman of Morgan Stanley Asia warned.
He added that he is concerned that the recent trade dispute between the two nations could undermine the economic achievements by both nations in past decades and adversely affect the global economic recovery after the financial crisis in 2008.
"I think it's not a time just to celebrate what we've done, but it's really time to do the hard work and figure out what we can do to keep this story (economic growth and recovery) alive," he added.
When it comes to dealing with issues between China and the U.S., Hormats said there is not a single deal.
"It would not be negotiated in the same way that it was with Canada," said Hormats. "If you're going to make progress between the U.S. and China, you have to build it from the top down, which means the two leaders have to incentivize their people to work together and give them the encouragement to work together as the U.S. and China have really done over the last 40-plus years."
"We have to recognize that we're now in a period where we're going to continue to have a series of difficult issues, fractious sides to resolve," said Hormats. "We can either choose to turn inward and ratchet up the confrontation, or we can begin to develop a series of procedures, a series of understandings on how we work out these differences."
