Now that Japan and China have become the world’s second- and third-largest economies, it is time for the two countries to not only cooperate bilaterally but also to work side by side and contribute to the region and the international community as responsible great powers. A responsible great power should not coerce foreign governments by arbitrary measures backed by their economic might. Such practices would undermine the trust of the international community and regional prosperity.
Great powers should contribute to the international community in a manner that is appropriate for their power. Based on Japan’s past experience, I would like to make few proposals to jointly address various issues in the areas of development and financial cooperation, debt issues, and trade and investment.
4.1 Development Cooperation
Firstly, regarding development cooperation, there is an annual funding gap of USD 2.5 trillion to achieve the SDGs target by 2030. Filling this funding gap is an important issue for the international community.
Given that China’s GDP per capita now exceeds USD 10,000 and China has a large presence in the development sector, many countries expect China, as a great power, to proactively work to graduate from a recipient of support from international financial institutions as well as to contribute to the financing for more vulnerable developing countries.
Already in October 2018, the Government of Japan announced that it would stop sanctioning new ODA projects in China and promote cooperation in new dimensions where Japan and China are equal partners.
Statistics put together and published by the DAC do not reveal all the details of aid provided by non-DAC countries. It has been pointed out that non-traditional and non-concessional loans, such as secured lendings, are provided to developing countries. We strongly expect that the assistance provided by China and other emerging donors will be conducted in a transparent manner consistent with international standards and efforts.
4.2 Debt Issues
Secondly, the impact of COVID-19 has further deteriorated debt vulnerabilities in some developing countries. To support the global economy, it is necessary for the international community, including Japan and China, to cooperate in dealing with this issue.
To solve the debt issues of developing countries, it is necessary for developing countries to steadily advance structural reforms under the IMF Financial Assistance Program. For developing countries with severely deteriorating debt sustainability, it is necessary to restore debt sustainability by implementing debt measures resolutely and transparently, based on the “Common Framework” on debt relief approved by the G20, Finance Ministers and the Central Bank Governors Meeting last November. We strongly expect that the China Development Bank, which has voluntarily implemented the Debt Service Suspension Initiative (DSSI) and disclosed the details of its implementation, will also implement debt measures based on the “Common Framework” in a highly transparent manner.
Since China is now the largest creditor for many developing countries, the loss of medium-term debt sustainability due to the insolvency of developing countries would be a serious loss for China. Working to solve the debt issue and supporting the sustainable economic growth of developing countries is the responsibility of major powers, exemplified by the G20, and will eventually be in China’s interest.
Regarding the debt data of developing countries, it is important to work toward ensuring transparency and accuracy not only when debt vulnerability is a concern, but also during normal times. If investors and developing countries themselves have a transparent and accurate understanding of debt data, it will help secure a stable inflow of investment to developing countries, which will in turn support sustainable economic growth. From this perspective, we expect that China, as a major creditor country, will work to ensure the transparency and accuracy of debt data, and cooperate with the IMF and World Bank in collating debt data.
Next, I would like to mention trade and investment. Twenty-five years have passed since the establishment of WTO, and many WTO members have enjoyed the benefits of free trade. It is not an overstatement to say that China, which joined the WTO in 2001 and achieved remarkable economic development through free trade, has become the prime example for such a member. In recent years, a few WTO members who have benefited from free trade and achieved economic growth have declared that they will abandon the S&DT (Special and Differential Treatment) status in current and future negotiations. China is currently the world’s largest trading country with the world’s largest trade value and trade surplus. It is imperative that we reform the WTO so that it can deal with various issues such as responding to unfair trade practices. We expect China, who takes pride in being a defender of the multilateral trade system, to act accordingly under the leadership of the new Director-General Okonjo-Iweala.
As digitalization progresses, the new rule-making on the Data Free Flow with Trust (DFFT) is a major task. The business community’s expectation toward e-commerce negotiations under the “Osaka Track” framework is also high. To restore trust in the WTO, based on the text of the integrated negotiations compiled last year, we would like to continue to accelerate negotiations in the hope of establishing high-standard rules for this year’s MC12 (Twelfth WTO Ministerial Conference). We expect China to support disciplines on the ban of domestic data storage requirements and protection of source code and encryption, which are essential for global digital business.