Emerging Economies

  • Economics
    The IMF and World Bank Spring Meetings: What to Know
    The IMF and World Bank’s spring meetings will focus on the prospects for a soft landing after years of global economic turbulence. But major challenges remain, including growing climate finance needs and persistently high global debt levels.
  • Brazil
    Brazil and the World
    Brazil plays a pivotal role on the global stage as a top ten economy, a leading democracy, and the dominant steward of the Amazon. A founding member of the BRICS, the country holds the 2024 G20 presidency and will host the United Nations climate summit in 2025. Experts from CFR and elsewhere examined Brazil’s current political, economic, and social opportunities and challenges, its evolving role in the world, and the decisive role it could play in combatting climate change. This event was made possible by the generous support of the Hauser Foundation.
  • Economics
    The Economic Outlook for 2024
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    Panelists discuss the global economic outlook for 2024, including the state of interest rates and inflation, prospects for growth in emerging markets, and ongoing conflicts around the world that could affect markets in the coming year. 

Experts in this Keyword

Miles Kahler
Miles Kahler

Senior Fellow for Global Governance

  • International Finance
    Academic Webinar: International Financial Architecture
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    Tamar Gutner, associate professor of international affairs at American University’s School of International Service, leads the conversation on the international financial architecture. FASKIANOS: Thank you. Welcome to today’s discussion of the Fall 2023 CFR Academic Webinar Series. I’m Irina Faskianos, vice president of the National Program and Outreach at CFR. Thank you for joining us. Today’s discussion is on the record and the video and transcript will be available on our website, CFR.org/academic if you would like to share them with your colleagues or classmates. As always, CFR takes no institutional positions on matters of policy. We are delighted to have Tamar Gutner with us to discuss the international financial architecture. Dr. Gutner is an associate professor at American University’s School of International Service, and expert on the performance of international organizations and their roles in global governance. In 2019, she held a CFR Fellowship for Tenured International Relations Scholars at the International Monetary Fund’s Independent Evaluation Office. She is the author of International Organizations in World Politics, published by CQ Press; and Banking on the Environment: Multilateral Development Banks and Their Environmental Performance in Central and Eastern Europe, published by MIT Press. And she recently completed a book manuscript on the birth and design of the Asian Infrastructure Investment Bank and its role in the landscape of development banks. So, Dr. Gutner, thank you very much for being with us today. I thought we could begin by having you outline for us the various change-related proposals and activities facing the World Bank, other multilateral development banks, and the International Monetary Fund. Just a small question, but—(laughter)—over to you. GUTNER: Thank you. Thank you, Irina, for introducing me, and thank you for having me as part of this seminar. I think these seminars are just a fantastic way for scholars, professors, students, and others to engage with these important issues, and I’m really excited to see so many people from around the world and professors and students and I see some colleagues in the audience. So I’m really looking forward to engaging with all of you. Right, so this is a critical time for the IMF and the World Bank and other development banks because their importance has been heightened by the need for them to respond to the various crises and challenges that we’re facing now. Many of these, as you know, are quite difficult to solve, like climate change. And the world is also dealing with the ongoing economic and social and health repercussions from the pandemic, the repercussions of Russia’s invasion of Ukraine including food insecurity. And we’re also living in a time when a lot more countries are at high risk of debt distress, and it’s a time when it’s becoming clear that progress toward achieving the Sustainable Development Goals are stalling. We also have major geopolitical tensions, which is an issue as well. So the IMF and the World Bank are leading international organizations in this scenario today. The IMF has been called the center of the global financial safety net. And the World Bank, meanwhile, is the leading multilateral source of climate finance, and is also playing a huge role in responding to various development challenges that impact its borrowing countries. And also, the regional development banks are addressing these issues as well. So for people who support multilateralism, there’s widespread agreement that no one state or actor can solve any of these cross-border issues on their own. And that means we’re living in a time when cooperation and multilateral action is absolutely essential, and these people agree we need more to be done to address these issues. But we’re also living in a time when many states have inward-looking politics, where there’s rising nationalism and populism. And this has produced people and leaders who either don’t see the value of international organizations (IOs) like the World Bank and IMF or they see them as contrary to national interests. The IOs themselves—the international organizations themselves—also struggle with relevance sometimes and mixed performance sometimes. And the IMF and World Bank constantly face criticism. They’re always being criticized. But I think one important thing to remember is that there’s no consensus among the critics. There are always people who want them to do more. There are people who want them to be abolished. So when you’re exploring the kind of critiques of these organizations it’s important to keep that in mind, just they’re coming from different actors and they have different thoughts. And, meanwhile, these institutions themselves, they have—it’s tricky for them because they have a tough job. They have to be responsive to their member-state shareholders, who don’t always agree with each other. They have to try to be responsive to other stakeholders, for example civil society actors; they don’t always agree with each other or with their member states. And so these institutions are constantly being pulled in different directions and they have to navigate that. To their credit, they do try to adapt and adjust, not always effectively. And there’s also variation in what they’ve done well and haven’t done well. But it’s precisely at this time today with these international crises that the Bank and the Fund and the other MDBs—multilateral development banks—have to try to do better. And what I want to do is offer you a brief overview of some of their efforts to do so and some of the challenges that face these efforts. So I’ll begin with the World Bank, which is in the midst of a process to figure out how to update its mission, its vision, its strategy, and its operating model. And this is a process that has been driven by shareholders, including the G20 members, and lots of other consultations. Last fall—well, first of all, I want to say there are a number of proposals on the table on how to reform the World Bank and other MDBs, and they have in common calling for these institutions to do a lot more to address climate change and other global public goods. And some of them call for more effort to better engage with private capital and to rethink how these institutions, which are in part banking institutions, how they can maximize the impact of their capital. So last fall the World Bank embarked on what’s been called an evolution roadmap to think through ideas for what should be done. This came out late last year amid calls for the Bank to be bigger and better. And this initiative was launched by U.S. Treasury Secretary Janet Yellen a year ago, and she led an effort with other non-borrowing and borrowing countries to call for the whole multilateral development bank system to evolve. As she put it, the world has changed and we need these vital institutions to change along with it. So the idea underlying all of these proposals is for MDBs to be more innovative and efficient. India made MDB evolution a priority in its presidency of the G20 this year, and there have been different expert panels that have also called for radically reformed and strengthened multilateral development banks. So what’s interesting for this audience is this evolution roadmap process will eventually turn into the World Bank’s strategy, its corporate strategy, and the latest version of it will be discussed next week at the IMF-World Bank annual meetings in Marrakesh. So if you’re interested in following that, keep your eyes on the news. And the latest version is seeking approval for measures that will allow the World Bank to boost its lending by $100 billion. So this—the document circulating now for the development—the Joint Ministerial Committee of the World Bank and IMF—and we’ll see what happens with it. And I’m happy to talk more about the document itself in the Q&A. These efforts to reform the World Bank are also impacting other regional development banks. So, for example, the Asian Development Bank recently announced it, too, will lend an additional $100 billion over the next ten years by relaxing some of its risk rules for its banking, how it manages its assets, without jeopardizing its triple-A credit rating. The IMF also has been trying to change and adapt in recent years. It’s not directly part of this evolution framework that’s focusing on MDBs, but the IMF has really turned attention to climate change and also to gender and inequality. And it’s essentially pushing forward a kind of a slow change in thinking where economists, and finance ministers, and central bank leaders have realized that these issues are essential to macroeconomic stability. So climate change has become a more visible focus of the IMF’s work, its work in surveillance, its capacity development activities, and its general work with countries. Its first strategy for mainstreaming gender was adopted in July 2022. And, like the World Bank, it has also created a number of mechanisms to respond to the pandemic. So it has a new resilience and sustainability trust. And the goal of it is to help low-income member states to address climate change and issues like pandemic preparedness. And it also has a new food shock window to offer emergency financing for countries facing food insecurity as a result of everything going on today. So this is—it’s interesting to watch both of these institutions. The IMF typically has a harder time changing because it’s a more rigid, set in its ways organization. But it, too—it’s not your grandmother’s IMF anymore. But all of these efforts are going to face their own sets of challenges. And I want to briefly highlight a few of them before we have our Q&A. So in the World Bank’s roadmap, which is also being called a new playbook, the question is: Is it a zero-sum game to balance more focus on global public goods like climate change with individual countries’ own development priorities? And there are many people who say, no problem. Kristalina Georgieva, the managing director of the IMF, when talking about this balancing issue, she said: Well, we can chew gum and walk at the same time. But these goals may have areas of overlap, where a country’s own development issues do coincide with these global public goods, but there may be areas where they do not. And that’s something that has to be worked out. There’s also some criticism in civil society and other actors about asking the multilateral banks to do much more to engage with the private sector. First of all, this idea has been around for a while, this idea of turning billions and trillions, for example, was part of the 2015 UN Financing for Development Conference. And it hasn’t really come through. So it’s a difficult issue to do. There’s going to be more work on it. But some organizations actually are concerned about potential negative effects of prioritizing incentives for private finance to provide co-financing to development efforts, because private sector goals are not always the same as public goals, right? So there’s some areas of tension. And finally, I just want to flag that all of these organizations are calling for more collaboration. Collaboration is almost the magic wand that will help all these efforts to work out better. And, in fact, if you look at the IMF’s new annual report, which was just published, it lists on its front page “committed to collaboration.” But, in fact, it’s not that easy for these organizations to collaborate. And I’m happy to break that down a little bit more. And so this great emphasis on something that can be difficult will be something that these organizations have to grapple with. I’m happy to talk about more of the issues in our Q&A, but I think I should stop here and open it up to questions or comments. FASKIANOS: Thank you, Tammi. That was fantastic. So we’re going to go to all of you for your questions. (Gives queuing instructions.) OK, so I’m going to take the first question from Mojúbàolú Olúfúnké Okome. Q: Thank you. Mojúbàolú Olúfúnké Okome. I’m a professor of political science at Brooklyn College. And I’m just wondering about this financial architecture that is much criticized, as you said. And I’m wondering the extent to which the criticism informs new decisions that are taken. So the criticisms about people who say the organization should be abolished is coming from the Global South, where there’s been feeling since the 1970s that these organizations are not sufficiently sympathetic or understanding of the challenges faced by the countries that had unsustainable debt, and are still in a deeper state of unsustainable debt today. So how is the global architecture on these—in these organizations dealing with these challenges? I heard for the first time, like, in the last five years—Lagarde, I think it was—that said, oh, we made mistakes in some of the advice that we were giving. So who pays for those mistakes? People’s lives are damaged, economies are wrecked. And you know, so what are the—what’s the good of these changes, really? GUTNER: Yeah, thank you so much for that question, because that’s a really good reflection on some of the harsh criticism that these institutions face. And I also would not be someone who says they do everything right, because they don’t. But it has been interesting to watch some of the ways that they’ve evolved. So, for example, they do interact much more with civil society than they used to. I mean, it used to be in the old days when the IMF and World Bank had their annual meetings, civil society actors would protest outside on the street in Washington, DC. And I would tell my students, feel free to go down there but please maybe try not to get arrested, you know? So there were—there were very large protests. Now, when they have the annual meeting, civil society actors are in—are part of it. They’re engaged in seminars. They’re engaged in discussion. The institutions have strengthened some of their accountability measures, although I could argue some of them are also still weak. But there have been changes. So for example, the IMF now addresses and thinks about social protection, which it didn’t used to do, and social safety nets, which it didn’t used to do in the past. So you can argue that these changes aren’t enough, and they’re too late, and it’s still harmful. But I think there is evidence that they do try to evolve and adapt, maybe not perfectly. And also, it’s really difficult to change a huge institution. It’s like turning a large ship. You know, it doesn’t happen quickly. But the narrative today is different from the past. I mean, there is—there is more focus on climate change, for example. Which you can argue some countries, it’s not really their priority. But even that’s changing. More countries, more developing countries, are realizing that issues of climate change are related to them, whether it’s through natural disasters, you know, hurricanes, floods, mud—you know, all of this. So I think it’s—I think this criticism is still out there. And it exists. The institutions are imperfect. But they do—they do slowly try to adjust and adapt. And if you dig into it, if you go into detail, you’ll find that they do a better job in some issues than others, in some countries than others, in some periods of time than others. So as a scholar I would argue that you—it’s hard to make a blanket statement about them without kind of unpacking, you know, specific cases and over time. FASKIANOS: Thank you. I’m going to take the next written question from Jon-Paul Maddaloni, a military professor at the U.S. Naval War College: For the World Bank, what is the definition of creditworthy? Is this a debt-to-GDP ratio? Is there a standard here that may be part of the developing world grievance against the World Bank? GUTNER: So there are complex ways of assessing that. But basically, one of the major ones is to decide if a country is eligible for IBRD loans, which are International Bank for Reconstruction and Development, the main part of the World Bank, which are loans that have to be repaid. And if a country is relatively less creditworthy or poor countries can access grants, or no-interest loans, or concessional funding from the World Bank’s arm that’s called IDA, the International Development Association—or, Agency. (Laughs.) I just—I just call it IDA. So if you’re—if you’re able to access IDA funding, you’re relatively less creditworthy. The World Bank also has other facilities to offer—both the bank and also the IMF—capacity development, which is just money given for technical assistance. And those are the different categories for the World Bank. So countries can change category. So if a country becomes more economically stronger, it can graduate from IDA concessional financing. If it becomes weaker, it can access that financing. And there are some countries which can get a blend. In other words, they’re creditworthy enough to be able to take some amount of loans, but not enough so that all of their financing can be a loan form. So these are some of the ways that the World Bank responds to different categories of creditworthiness. FASKIANOS: Fantastic. I’m going to take the next question from Fordham’s International Political Economy and Development Program. They have a raised hand. If you can just say who you are. (Laughter.) Q: Thank you for being with us today. I’m Genevieve, part of the Fordham IPED Program. My question is, what are some specific examples of how a country’s national political landscape and private interests cause these setbacks for cross-sectoral collaboration in these development banking efforts? And how do these large banking institutions work around corruption, for example? GUTNER: I’m sorry. Can you repeat the first part about collaboration—cross-sectoral collaboration? Q: Yeah. What are some specific examples of how a country’s national political landscape and private interests cause setbacks for cross-sectoral collaboration for these development banks? And then we could take corruption as an example. GUTNER: So I’m not 100 percent sure what you mean by the—by the cross-sectoral collaboration. When I’m focusing on collaboration, or when the narrative is focusing on collaboration, it’s really focusing more on collaboration between, for example, the World Bank and IMF. How do they collaborate? And the answer to that is, they haven’t collaborated well for almost eighty years. But that’s not—what I think you’re asking is, what happens between these institutions and the national level? Well, one issue—the issue of corruption has become much more widely discussed in both the World Bank and the IMF. In the past, it was seen as a domestic political issue, which is really outside their articles of agreement. They’re not supposed to get involved in these domestic political issues. But there’s much more awareness today that corruption—for example, in the IMF—corruption impacts a government’s health—the fiscal health, their ability to have money to spend on development. And the same is true for the World Bank. So there’s much more attention on these issues. The institutions still have to navigate carefully so that they don’t look like they’re getting involved in politics, even though they can’t really avoid it. But so corruption is much higher on the priority list. And it can impact a country’s ability to get funding from either institutions. So from the World Bank, and they have—they have lists of companies they won’t work with in procurement, for example, who are barred from engaging in procurement. And it’s part of discussions. It shows up in the partnership—the framework documents that both countries produce for individual countries. So a kind of a—this is a long way to say, it’s on the radar and it matters. But a lot of the collaboration issues are related to how the institutions work with each other. But also in country, I should add, that in some countries the donors collaborate on the ground. So they meet together and they try to make sure they’re not overlapping. There’s—it doesn’t always work very well. You know, in some cases it works better than others. But for the institutions to collaborate more with each other, they have faced many challenges in doing that. FASKIANOS: Thank you. I’m going to take the next question from Joshua McKeown, associate provost and director of the international education at State University of New York at Oswego: For context, how much lending does the World Bank do in comparison with regional development banks? GUTNER: Well, I guess it depends. I don’t have all that data at my fingertips, but the World Bank in the last—in—let’s see, I do have the World Bank data at my fingertips. Let me just pull it up. See where I had it. The World Bank in its current annual report, the IBRD committed $38 and a half billion in 2023. IDA committed $34 billion. The regional banks are much smaller, so the World Bank tends to be the largest. But there’s also a lot of variation across the regional banks as well. Now it’s important to say that they will often cofinance projects with each other. So the regional banks will engage with the World Bank, and they’ll have shared projects, and they’ll work together. There are times where they also will compete with each other on occasion. They might both be interested in funding an airport—building an airport somewhere. And one of them may offer more attractive terms than the other. But the competition is not kind of a serious problem, because basically wherever you look in the world, there’s almost an infinite demand for infrastructure finance. You know, show me a city that doesn’t need a new metro, or the roads repaired, right? So there’s a lot of demand out there for these banks to be able to do what they do. And but that has to be tempered with the, on the other side, how much debt can an individual country take on? And that’s where we’re seeing more serious problems today. FASKIANOS: Thank you. I’m going to take the next question from Samia Abdulle from Professor Fazal’s class. And she is at the University of Minnesota: How has COVID-19 renewed the debate about the World Bank’s role in international development? GUTNER: That’s a great question, because when it comes to crisis, member states turn to these institutions right away. And this is a little separate from your question, but before the global financial crisis, for example, the IMF and the World Bank had seen their demand for their services drop dramatically. There were questions about the legitimacy of the IMF. Then the global financial crisis hit and, boom, they were kind of the go-to organizations to help respond to these issues. So the World Bank and the IMF both responded pretty rapidly to the pandemic. And they each came up with new facilities, they got money out the door quickly, they relaxed some of their conditions. So they both had a kind of a robust response. Now, there are people who are saying, well, it was not enough. It should have been more. But, you know, they did a lot. And in an emergency situation, also, you have to remember, they all had to work at home as well. So everybody was working at home. Nobody could travel, but yet they got a lot of money out the door quickly, in different kinds of ways. And I think what we’re going to have to revisit down the road is, did any of that money disappear? You know, where—was there accountability for all this money, because it was moved out the door so quickly. And the head of the IMF, Kristalina Georgieva, would say: Just save your receipts. (Laughs.) Just save your receipts. But that’s going to be something to see, what happened with this money, where did it actually go, how did accountability work? But the World Bank alone got $30 billion—it dispersed $30 billion in fifteen months at the beginning of the pandemic in emergency support. So they really did step up. And whether it was enough or not is a matter of opinion. But they moved—they did move quickly. And I should just add, since you asked about—I just want to add one thing. The World Bank was involved in getting people access to vaccines, helping weak health infrastructures in countries, and all kinds of issues related to the pandemic. FASKIANOS: Fantastic. So I’m going to take the next written question from Yiagadeesen Samy, who’s the director of the School of International Affairs at Carleton University in Canada: You already covered the AIIB in your opening remarks, and we will be circulating this transcript in the video later, but let’s look at the second part of the question. Can you comment a little bit on whether the proposed changes to MDBs are a reaction to China’s growing influence? And if so, what your views are about the changing geopolitical economic dynamics? GUTNER: It’s so great people are asking these simple questions. (Laughs.) FASKIANOS: I know! GUTNER: Yes. FASKIANOS: Keeping you on your toes! (Laughs.) GUTNER: Yes. So let me preface by saying this: China has different strategies in development banking. On one side, you have the AIIB, for example. On the other side, the Belt and Road Initiative. The AIIB is not—in my research, it’s cut from the same cloth as other development banks. It’s not a threat. It’s a part of the landscape of development banks. It’s part of the community. It was designed by an international group of experts. In fact, the person who wrote the AIIB’s articles of agreement was an American. And the person who designed the AIIB’s environmental and social framework was an American. So it was a—it was a real international effort. And in fact, the World Bank helped the AIIB get set up. So the World Bank volunteered staff and gave the AIIB advice on things like vacation policy and office furniture. This is the Beijing office of the World Bank. And the World Bank even ran the AIIB treasury at the beginning, and it cofinanced projects. So the AIIB is cut from the same cloth as development banks. Now, it does have some differences. It’s has—it’s much smaller. It has a staff under four hundred. The World Bank is ten thousand, for example. And so there are some people who think it might have spurred the World Bank to pay more attention to doing more on infrastructure, which it had moved away from a little bit because that’s the AIIB’s focus. But the Belt and Road is something different. It’s a bilateral initiative. It’s an umbrella for Chinese financial institutions to lend money for infrastructure. It’s not actually an organization. It’s just an umbrella term. And there are differences, because the banks lending under the Belt and Road, Chinese institutions, they don’t follow global norms on environmental and social framework, on safeguards. They’re not transparent. We can’t—we don’t know how the loan is structured. They don’t report the lending numbers to the Paris Club, for example. So there’s a real difference between China’s strategy in the AIIB and China’s strategy in the Belt and Road, which reflects the different natures. There’s not one Chinese strategy. So I think, in a way, the existing development banks help the AIIB more, and their staff help the AIIB more. The Belt and Road is a separate thing. But what I think is going to be interesting is to see if the borders, the boundaries between what is done following global norms, and rules, and procedures, if there’s any kind of crossover with what’s inside those borders and what’s outside those borders. So for example, the AIIB is hosting a facility to help countries better design infrastructure projects that might be undertaken under Belt and Road. And so we just have to keep an eye on that. But it’s not—it’s not a bleak or black and white picture, the way some people describe it. FASKIANOS: Fantastic. A good follow up question from Steven Shinkel, who’s the military professor of national security affairs at U.S. Naval War College: Can you compare the relative use of concessional loans between the World Bank and China? What about loan forgiveness, especially in regions such as Africa and South America? GUTNER: Right. So most of the Chinese lending under Belt and Road is not concessional. Most of it is not concessional. And often interest rates are higher than a comparative loan, even from the IBRD, even non-concessional lending. So they will often charge higher interest rates, but they will have less conditionality. So a country trying to decide who to take a loan from will have to weigh that. Do we want a lower interest rate loan from the World Bank that might have more policy conditionality, we might have to adjust our policy, we might have to think about environmental impacts more? Or do we want a slightly more expensive loan from a Chinese lending institution, but it doesn’t have any strings attached? So that’s kind of the part of the decision-making that borrowers have to go through. On debt—the second part was on, I’m sorry, the question disappeared. On debt? FASKIANOS: Oh, sorry. Yes, the second question is: What about loan forgiveness, especially in regions such as Africa and South America? GUTNER: Well, that’s something that’s being widely discussed right now, because Chinese institutions haven’t been as comfortable about that, or as used to that. And they’re—you know, they’re being pushed by other institutions. Hey, you have to take a haircut too. We all have to—we all have to do that. There is a little bit of that going on. But it’s something—I mean, if you read the article suggested in the email about this talk by Deborah Brautigam, she really unpacks that in great detail. And she makes an argument that there’s some kind of learning and give and take that’s happening and we need to see more of it. FASKIANOS: Fantastic. Next question from Lindsey McCormack, who’s a graduate student at CUNY Baruch College: There’s a lot of activity in the U.S. and Europe with new disclosure standards on climate and social impacts of corporations. How do the multilateral development banks relate to this activity? Are they seeing more pressure to discuss—oh, sorry—disclose climate and social impacts of their lending? GUTNER: Yes. (Laughs.) Yes. Now, they already do a lot. They already have environmental and social safeguards. And they’ve all moved away from funding oil and gas, or mostly oil and some gas. So they’re moving away from that. And they’re all working together, actually—I mean, I think it’s an important example of networking—of the network of MDBs—that they’re all moving toward meeting—complying with the Paris Agreement and showing how they’re doing that. Now, some of this is how they measure things, and how they label things, and how they account for things. So there’s still some debate on whether they’re doing enough. But there’s, for sure, pressure from NGOs and others. And the banks are moving in that direction. And they’re—they’re proudly touting how their projects comply. A high percentage of their projects are complying with the Paris Agreement. But there’s still some interesting criticism coming out. So, for example, there was a recent report by a German NGO that said the World Bank’s private sector lending arm, the IFC—that the IFC was making loans for trade support where that money might go into oil and gas. But you can’t tell, right? So they were calling for more transparency on how the IMF is—how the IFC is doing trade credits. So that’s something that’s very recent. You can look that up and read more about it. FASKIANOS: Just to follow on, how are the multilateral development banks structured? And how effective do you think they are? GUTNER: Structured in terms of what? I mean, I can talk generally in case—so they— FASKIANOS: Yeah, I think corporate structure. GUTNER: So they have—they all have board of governors, which are all the top relevant officials of their member states, typically the finance minister or the central bank head. And they meet once or twice a year. And they make the big decisions. So one thing that’s important to realize is a lot of these countries are members of a lot of development bank—there’s a lot of overlap in membership. And that’s also a way to cross-fertilize ideas, and policies, and things like that. They all have boards of directors, which are more engaged with the day-to-day business. And the—voting is based on your shareholding in the development bank. And that is based broadly on your economic strength. So the economically stronger companies have—stronger countries have a larger share and more voting power. And then you have the presidents of these organizations that have an important leadership role. And then you have the staff. So that’s basically the structure of these development banks. And meeting next week are the board of governors and the directors in Marrakech for the World Bank and IMF. And you can see how they engage with staff and how they help set the strategic tone for the institutions. FASKIANOS: Fantastic. And I just want to remind everybody to raise your hand if you want to ask a question. Everybody’s a little bit shy today, or else Tammi’s been so thorough that you have no questions. (Laughter.) But I have more questions. But first, I’m going to go to Don Habibi, who is a professor at the University of North Carolina Wilmington: With yesterday’s stock market plunge and political instability in the U.S., how much concern should we have over the multitrillion-dollar national debt? GUTNER: So that’s not an issue that directly impacts the international financial institutions, the IMF, and the World Bank, right now. I mean, the U.S. is the largest shareholder of both, and they both—or, the World Bank has a AAA credit rating. So it’s not really—we might be concerned over national debt, but so far it’s not having a big impact on the dollar. So far, it’s not having a big impact on investment. So there’s always kind of some concern, but it’s not—it’s not translating into anything that’s making people nervous about how these organizations operate. But, you know, one place to look for an answer, I’ll tell you this, is when the IMF does surveillance, it does—which are its reports on the economic health of individual member states. It does these surveillance reports even on the rich countries. It does them for everyone. So I would suggest you look for the latest article for surveillance report that the IMF has done on the United States, and see what it has to say about concerns about debt. FASKIANOS: Fantastic. You recently completed a book manuscript on the Asian Infrastructure Investment Bank. Some policymakers and scholars have argued it is a threat to the World Bank. Can you talk about if you agree with that or disagree? GUTNER: Oh, right. So I answered a little bit of that earlier, actually, which is: I don’t think it’s a threat because I think it’s cut from the same cloth as these other development banks in terms of it has similar policies, it has similar governance rules. The World Bank—it’s signed MOUs, memoranda of understanding, with all these other development banks. It cooperates with them. It cofinances projects with them. So I think the narrative of the AIIB being a threat is not correct. Could something change in the future? Who knows. But there has been a recent scandal at the AIIB. And we don’t know how that will yet be resolved, where this past summer the Canadian director of communications resigned dramatically, suddenly, arguing that Communist Party committees were somehow involved in the work of the bank. And we—so, Canada froze its membership. So that’s a bit of a scandal and a crisis at the AIIB. And Canada is doing its own report on what happened. So I kind of think we have to see what comes out of that report. If Canada decided to leave the AIIB, would it impact any other members? Too early to say. But so far, there’s nothing directly threatening about its work. It’s walked and talked and behaved like other development banks. It does have some differences. It has a nonresident board, which was seen as a cost-saving measure. You know, why have all these people sit around and cost a lot of money? But there are some civil society actors who think that that could produce less accountability. If the board is not there, you know, the bank has more kind of autonomy to do—more independence. So there are some differences. But so far, it’s been just another member of the multilateral development bank system. FASKIANOS: Thank you. All right. We have more hands raised, which I’m very excited about. Tanisha Fazal, who is the Weinstein chair of international studies at University of Richmond: You mentioned the difficulties of collaboration between IMF and the World Bank. Can you please elaborate on what you see as the primary obstacles to collaboration between MDBs? GUTNER: Yes. I’m happy to talk about that. So that was the topic of my year—my Council on Foreign Relations fellowship at the International Monetary Fund’s Independent Evaluation Office. And we were evaluating Bank-Fund collaboration. And I was part of the overall evaluation, which you can find online. And I also wrote a separate paper on the history of Bank-Fund collaboration. And I found it to be absolutely fascinating, because these two institutions were created together at the Bretton Woods Conference. And they’re called the Bretton Woods twins. They’re literally across the street from each other. There’s an underground passage that connects the two. They interact all the time. They have a joint orchestra. I don’t know if anybody knew that. (Laughs.) They used to share a library. So there’s a lot of—if any two organizations should be able to work closely together, it’s these two, right? This should be your best case, and yet they’ve struggled for their entire existence. And I think one of the obstacles is that over time their issues have overlapped. So an example of that is today, when the IMF is doing more on climate change, gender, and inequality, which traditionally is the work of the Bank. So their work has kind of—over time, given the issues facing the world, it’s kind of naturally overlapped. And what I found that was very interesting is in over twenty-five different formal attempts the two institutions produced to collaborate with each other—memos and announcements by the heads of the institutions—for decades, what they meant by collaboration was turf delineation. Collaboration meant you stay out of my territory. (Laughs.) I don’t think of that as collaboration. It’s working together on a common objective, right? So that was what they meant by it, and for many years what they—what the solution was, that the institution that’s not in charge of this issue should yield to the judgment of the other one—the yield to the judgment one. So I think turf overlap has been a problem. But even when they make an effort, often they have different incentives, they have different budget cycles, they have different—you know, it’s just not that easy. And the IMF’s latest strategy for collaboration has been when IMF staff encounter an issue that they don’t have expertise in, they should leverage the expertise of the World Bank and other partners. Well, that, to me, sounds like one-way collaboration, which is an oxymoron, right? That if the IMF needs help, it should call the IMF and get help—I mean, call the World Bank and get help. But for the World Bank, they might be busy. (Laughs.) So those kinds of challenges persist. There have been times where they do create a truly collaborative effort, like the HIPC Initiative, or the FSAPs, or the PRSP—sorry for all the acronyms—but where they—where they have a shared work program and shared guidance and shared expectations. Those have tended to work better than big umbrella exhortations by the leaders saying: Collaborate! You know, do more collaboration. Those have tended to work better, but they also run into individual problems. So really, the upshot is, even though you would expect collaboration to be the easiest and make most sense between these two institutions, in fact, it’s often been a struggle. And some people found, when I mentioned the IMF’s resilience trust, that’s something that would normally have been undertaken by the World Bank. So they have not—they have had challenges collaborating, and those continue. FASKIANOS: Thank you. And I need to correct the record, my apologies. So that question was from Tanisha Fazal, who is an associate professor of political science at the University of Minnesota. So the next question is from Sandra Joireman, who is the Weinstein chair of international studies at University of Richmond. So my apologies. So this this question is from Sandra: Some of the previous efforts to address the environmental impacts of certain projects were ineffective. Do you think new efforts to address the environment and climate challenge change will be better? If so, why? GUTNER: So I’m guessing you’re referring to the World Bank? And, yes, there’s a whole long history of the Bank addressing environmental issues. And it really started in the 1980s, when NGOs identified projects that had gone horribly wrong and caused enormous environmental degradation. Like the Polonoroeste highway in Brazil. It was a famous—infamous example. And the Narmada dam in India. These are infamous examples. But when you look over the years, there have been improvements to what kinds of things the Bank can lend money to, how strong the environmental and social safeguards are. So when I look at the whole history of the World Bank and environment, I basically see it is not a one-way trajectory, and as forward or backward. I see it as more zigzag steps, some forward steps, some backward steps, some forward steps, some backward steps. So overall, because climate change is becoming one—it’s about to become a major part of the Bank’s mission and vision. So before it was shared prosperity and poverty reduction, and now it’s going to—if it’s all approved next week—it will be shared prosperity, poverty reduction, and a livable planet. So climate change is kind of moving the front row and center. And that will make it harder for the Bank to fund projects that can be criticized. It will make it much more important that it follows these solid environmental and social framework rules. So I think it’s a move in the right direction. But as I mentioned earlier, we’re still seeing criticism from NGO about things slipping through the cracks, like trade finance, right? Or another area that’s weak is the World Bank—the IFC and the World Bank will sometimes lend money to financial intermediaries. So it’s like—it’s like lending money to a local bank that then lends it out for something else. And there’s been less oversight about how that money is on lent, and whether that can go for something that’s damaging to climate change or the environment. So they’re moving in the right direction. I think there’s been progress. I think there’s been backward steps and forward steps over the whole arc of the World Bank’s efforts in this area. And I think there’s still going to be some criticism as they address some of these areas where there’s slippage. FASKIANOS: Thank you. I’m going to take the next question, a raised hand from Sheri Fink. So, Sheri, if you can say who you are and accept the unmute prompt. Q: Oh, I’m sorry. I think I pressed the wrong button. I didn’t mean to raise my hand. Sorry about that. FASKIANOS: OK. No problem. All right. I will take the next question from Eric Muddiman, master’s student at Norman Paterson School of International Affairs in Ottawa, Canada: In terms of mobilizing more private capital and development, there has been discussion on MDBs’ role in mitigating risk. Private sector are not allowed to invest in BB/BBB ZIP code investments from a regulatory perspective. Are there concrete proposals advancements in these discussions? GUTNER: Yes. Do I know what they all are? No. It’s kind of a live discussion. And I know, in the new World Bank—the latest version of the evolution roadmap, there’s talk about creating, like, a lab—an innovation lab, or a private sector lab, to try to do more. Some of the banks have hubs in some areas where they—areas in the developing world where they might have better access to private sector actors. And they’re trying to engage with private sector actors in conferences and find ways of discussing project ideas. So that’s not as concrete as you like, perhaps, but there are efforts to think about this. And there was a seminar at the spring meetings with private sector actors who are also saying that they felt they could do more to engage colleagues and find ways to bring the private sector and public sector together. So there are initiatives, seminars, hubs, labs. You know, all of this stuff is kind of lively and happening right now. And I do think it will be interesting to see what, if anything, catches on. Because, as I mentioned earlier, this discussion has been going on even before 2015, but the turning billions into trillions discussion. And it just hasn’t worked out that well, because of these issues like risk, right? Private sector actors may not want to involve in countries where the risk is too great and where countries don’t have capacity, where they have weaker capacity. So there are many challenges in this area. And just a variety of activities and ideas being put forward to try to respond. FASKIANOS: Thank you. Next, a raised hand for Walton Brown. You can accept the unmute. There you go, Walton. Q: So I too—I didn’t intend to hit anything. I’m so sorry. FASKIANOS: OK. That’s OK. GUTNER: You can still ask a question. (Laughter.) FASKIANOS: That’s OK! You can still ask a—exactly, Tammi. We can—we can still—we love hearing from you all. So, all right. Well, we will continue on— Q: And my phone is troubled. FASKIANOS: Phone is troubled. (Laughs.) No problem. That’s just fine. OK, so I’m going to go next to—let’s see, we’ve got several who don’t have affiliations, but let me go to Holley Hansen: A lot of previous questions have focused on the World Bank or IMF operations. But going back to your original remarks, there also been discussion on how internal rules and procedures, such as voting, leave stakeholders out of the decision-making process. What major suggested reforms to internal decision-making do you think are viable? And what are the pros and cons of changing those rules? GUTNER: Well, the voting is part of internal decision-making. So the voting is part of that. And the real issue has been, how can—well, one of the real issues is shouldn’t China have a greater stake? Shouldn’t China have a higher stake? Because China is now the number-three largest stakeholder in the World Bank and the IMF, after the U.S., number one, and Japan, number two. But its stake, at around 6 percent, is really less than it should be if you follow the kind of formula they use to calculate a state’s economic strength. It’s been calculated that really it should be more like 12 percent, right? So part of the discussion is how to give developing countries, and especially China, more weight in governance through the—through the voting share. And that’s an ongoing discussion. Right now, in today’s kind of more tense political—global political environment, it’s hard to imagine the U.S. supporting something like that at this juncture of time, although there have been reports that the managing director of the IMF is open to it. So I think this is going to be one of the issues that is discussed in Marrakesh next week, what to do with these voting shares? But they do adjust them every so often. So China did move up from having a lower ranking to now being number three in the IMF and World Bank. So it does happen over time. Internal decision-making is a whole complicated other kind of issue. And these development banks, you know, they all face internal decision-making challenges. They all face kind of common tensions. So one of them is how you balance authority between the country—people who work in the country and people who work on sectoral issues. So how do you—who should—who should have more decision-making authority, the country level or the sector level? There are decision-making issues and tensions between the public sector lending arms of these development banks and the private sector lending arms, because they have different incentives and different goals. So there have been challenges inside these development banks with kind of internal silos and where power and authority should be held. And it’s hard to come up with what the right answer is. You know, there are pros and cons to giving more power to the country or more power to the sector. And in fact, these banks restructure from time to time. And if you look at kind of the history of the restructuring of some of the major development banks, they sort of move back and forth between where they think authority should be located. So these issue—it’s a whole other can of worms than voting power on the board of directors. But it’s important, because it can affect their performance. It can affect their performance and their ability to function effectively. FASKIANOS: Thank you. I’m going to take the last question. We have several quick questions from Fordham again. Let’s see. There you go. Q: OK, thank you. So in the worst case scenario that the U.S. and China engage in conflict in Taiwan, how would the World Bank respond to the economic shocks of this in geographically vulnerable neighboring countries, such as Vietnam, Laos, and the Philippines? GUTNER: That’s a tough question. Thank you for ending this with a really tough question. We’re not supposed to say I don’t know. (Laughs.) We’re supposed to have—that’s a tough one, because, again, China is number three at the World Bank. So if China—couldn’t—most of the time voting doesn’t happen. Most of the time, it’s consensus. So it’s hard to predict. I mean, you’d have to unpack a lot of different things there. You’d have to unpack what kind of—what would the World Bank normally do? Would it normally—would it affect development lending to neighboring countries? I mean, it’s interesting to look at the case of Russia’s invasion of Ukraine and how—what the response to that has been, because Russia’s a member of all these institutions too. But the development banks mostly froze lending to Russia. Also, the AIIB did, because it had to comply—to comply with these sanctions. So Russia lending has been frozen. And these institutions are all giving money to Ukraine to help Ukraine rebuild. So there is kind of a situation that can be—that can be used to compare, to kind of get ideas about what might happen, right? And even at the AIIB, Russia is number three largest shareholder in the AIIB. It’s China, India, and Russia. And the AIIB immediately froze lending to Russia. So we could—we could kind of play out different scenarios, but there’s a lot of unknowns in that case. And I do think looking at the response of MDBs to Russia’s invasion of Ukraine could provide some useful lessons. FASKIANOS: Tammi, we are at the end of our time. And I apologize that we couldn’t get to all the questions. I wonder if you could just take a minute. You were awarded a CFR Fellowship for Tenured International Relations Scholars, which allowed you to work—be placed in a government office. So if you could just take a minute to talk about that experience and encourage other professors to apply. The deadline’s coming up. It’s the end of October. So it just would be great for you to just give us your— GUTNER: Absolutely, yes. All the professors in the audience, please apply for this, because it’s a special, invaluable experience. When you’re—when you’re studying something, and you have the opportunity to be an insider for a year, I can’t even tell you how much you learn. I learned being—and it’s a two-way street. They benefit from the expertise of the scholars who are coming in because we bring a different perspective. We bring different analytical and methodological tools. And I just can’t tell you how much I learned that I could never find out as an outsider, including the IMF-World Bank orchestra, or the—(laughs)—yeah, actually, maybe some outsiders know that. But really, to open up the black box of an organization and see firsthand about how things work internally, what the culture’s like, how things get done, what happens in the hallways. I mean, all that stuff, all of those kinds of details really enhanced my scholarship and shaped my research direction, working on these issues of collaboration, for example. So if any of you are considering applying, please feel free to get in touch with me if you have any questions about the fellowship. I’d be happy to discuss it with you. FASKIANOS: Thank you. Thank you for that, and for your amazing insights into these issues. And to all of you for your great questions. You can follow Dr. Gutner on X, the app formerly known as Twitter, at @TGutner. And for the students on this call, CFR has paid internships. So to learn more about the internships you can go to—and also the fellowships—you can go to CFR.org/careers. Follow us at @CFR_Academic, and visit CFR.org, ForeignAffairs.com, and ThinkGlobalHealth.org for research and analysis on global issues. And the next Academic Webinar will take place on Wednesday, October 11, at 1:00 p.m. (EDT). Landry Signé, senior fellow at the Brookings Institution, will talk about Africa on the global stage. So, again, thank you to Tamar Gutner. And to all of you, have a great rest of your day. GUTNER: Thanks for having me. And thanks to everyone for attending. (END)
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    Zongyuan Zoe Liu, fellow for international political economy at CFR, leads the conversation on global economics. FASKIANOS: Thank you. Welcome to today’s session of the Fall 2022 CFR Academic Webinar Series. I’m Irina Faskianos, vice president of the National Program and Outreach at CFR. Today’s discussion is on the record and the video and transcript will be available on our website, CFR.org/academic. As always, CFR takes no institutional positions on matters of policy. We’re delighted to have Zongyuan Zoe Liu with us to talk about global economics. Dr. Liu is a fellow for international political economy at CFR. She previously served as an instructional assistant professor at Texas A&M’s Bush School of Government and Public Service in Washington, D.C. And before that, she completed postdoctoral fellowships at the Columbia-Harvard China and the World program and the Center for International Environment and Research Policy at Tufts University. She served as a research fellow and research associate at many institutions—the Reischauer Center for East Asian Studies, NYU’s Stern Center for Sustainable Business, and at the Institute for International Monetary Affairs in Tokyo. Dr. Liu is the author of Can BRICS De-dollarize the Global Financial System?, published by Cambridge University Press; and Sovereign Funds: How the Communist Party of China Finances its Global Ambitions, forthcoming in 2023 by Harvard University Press. So we will stay tuned for that. So, Dr. Liu, thank you very much for being with us. This is a very broad topic, but it would be great if you could give us your analysis of the state of the global economy today. LIU: Yeah, thank you very much, Irina, for inviting me to do this. I really, truly appreciate the opportunity to engage with our college and national universities, both the faculties and the students. This makes me feel I’m very much still part of the academia community. So thank you very much, Irina, and thank you, everybody, for tuning in today. So I wanted to begin by saying that as an economist one thing that I learned is that we are very bad at making forecasting. And, once that forecasting is already very bad, but—and forget about the long run. But that being said, I hope our conversation today can at least exchange some perspectives in terms of how we think about global economy and how we think about some policy-relevant natures. So the first—I will begin by saying two statement, and then I will delve into it. The first statement I would say that I’m afraid that geopolitics probably would make economic forecasting, which is already a very difficult business, but geopolitics would likely make this business even more difficult going forward. And this is because global economic prospect will be more influenced by geopolitics and geopolitical tensions, in addition to pure supply and demand. So that is to say, for our—all our college students and our graduate students, who are either pursuing a political science degree, international relations, or economics, or anybody who are vaguely interested in understanding global economics, now this is the time to realize, well, the models may not—the models had their limitations before, and their limitations are probably going to be even more pronounced going forward. The pure supply-demand dimensions—price is set in certain ways—probably are not necessarily going to go that way. One such example would be the European Union and the United States are considering putting a price cap on Russian oil. And what does that mean? That probably means, well, it almost feel like for a long period of time there was this global cartel called the OPEC or OPEC+. These are the so-called sellers’ cartel. And they have the power, the monopolistic power almost, in terms of setting the price of oil in the global market. But now we are probably going to see the other part of the story, which is what about a global buyers’ cartel? And that is essentially what a price cap means. So long story short, I think geopolitics would play a lot into our analysis of global economics forecasting going forward. And then my second sort of quick statement would be in terms of global economic status today. I would say the key—like, let me take a step back. When we think about economic development, we tend to think about factors of production. Like, for our—again, for our students who probably learned this at the beginning of the semester, this is the time to refresh your concept. But key factors of production—one is resource, the other is technology, and then the other is labor. In terms of resources, you can think about natural resources as well as capital. So these three fundamental factors of production, I would say, they are all going through a period of changes. And these changes are not necessarily in a good way. So that, long story short, a lot of the changes now in global economic conditions may not necessarily be good. And I’m happy to go into a detailed analysis of why resources are not necessarily changing in a good way, or technology, or in terms of labor and demographics. But I’m also happy to stop here and then sort of answer questions or explain further going forward as well. FASKIANOS: Great. We will go to all of you to ask your questions. (Gives queuing instructions.) So we already have a question. It’s from Fordham University. Raised hand. So you’re going to tell us—have to tell us who you are and unmute yourself, or accept the unmute prompt. There you go. Q: Can you hear me? FASKIANOS: Yes. Q: OK, great. Yes, so I’m a third-year student at Fordham University. My name is Valerie Bejjani. And my question for you, Dr. Liu, pertains to your paper—your Cambridge-published paper—about non-dollar alternatives, which I find very fascinating. And it made me think about something I read for an international political economy class about how Keynes first introduced a non-dollar alternative called the bancor during the Bretton Woods Conference, but the U.S. shot it down. So I was curious about your opinion on this, whether you think it was a mistake for the U.S. not to accept it, and what you think the implications—the historical implications are for BRICS countries today that are trying to devise their own non-dollar alternatives? LIU: Thank you very much, Valerie, for your great question. And I have to—since we’re on the record—I just have to say, this is not a planted question. (Laughs.) And I very much appreciate that you’ve given me the opportunity to talk about the research that I did before. So just a quick background about that research that I did, I finished the research last year—yeah, last year in the summer, in July. So when I submitted my manuscript, there was a review process, right? And then that was the moment when not everybody were interested in SWIFT, in SPFS, in China’s cross-border banking—Cross-Border Payment System, or CIPS. So a lot of these alphabetic soups that everybody here are familiar with now, last year before Russia’s invasion of Ukraine nobody was even interested. And one of the reviewers was even telling—had a comment there saying that, well, you know, don’t necessarily think that these are good examples that deserve to—so many real estate. (Laughs.) But and then my publisher somehow engineered it such that my—that Cambridge publication came out right on the day of Russia’s invasion of Ukraine, which was—that was—as a researcher, you probably can never hope the timing in that way. So going back to your question, Valerie, I would say I highly appreciate that you raised the question. And I respect that—highly respect that you are already getting yourself familiarized with Keynesian and all the other historically speaking alternative monetary system or monetary concept as well. So that’s all good. So keep doing what you are doing now and I look forward to continuing our conversation going forward. So your question, if I understand it correctly, so is it a good idea for the United States to shut it down, right? So I mean, if I were—I was obviously not in the policymaking room in those days, but I can certainly understand why the United States would want to maintain the dollar’s dominant currency status in the global financial system. That’s because if you are able to—if the dollar were the dominant currency, in the existing dollar—in the existing global financial system, that basically means on the one hand we can issue debt cheaply. And that literally means the U.S. Treasury is the proxy for risk re-asset. That has huge implications not just for our government debt and our physical expenditure. It also has a tremendous amount of stabilizing factor for our domestic financial institutions and the expansion of our banks in the international market. So from both public perspective and the international perspective, those are good. And the United States has, from a policymaking perspective, all our financial policymakers had their right to shut it down. Now, but if you ask this question from an alternative perspective—say, if you ask the question for—to, let’s say, Bank of England Governor Mark Carney—former governor. If you ask him, he would probably tell you, well, this is a terrible idea that the United States would shut it off, because he specifically said in 2019 at the Jackson Hole symposium, when all the major central bankers were gathered in the big hall and talking about monetary policies, he was the one standing in front of everybody saying that, well, it’s a terrible idea to have one single currency, which is the U.S. dollar, to dominate the global financial and monetary system. That is the reason why the system is not stable, hence we need to have an alternative system. Like a basket currency or something like that. So, if you ask people like him, he would be—like, be in favor of the diversity—of a more diversified global monetary system. And again, if you ask the countries like China or, for that matter, Russia or Iran, they would be way much more in favor of a much more diversified monetary system as well. And that may not necessarily, from, exchange rate perspective, exchange rate risk is an important aspect, but the more important aspect probably is from the geopolitical hegemonic power of the U.S. dollar. Which means, the U.S. sanctioning power really resides in the dollar being the dominant currency. So right now, we hear about U.S. can sanction Russia, sanction other countries. How that is being executed, it is literally being executed by our banks no longer processing the bank transactions of all the Russian banks. Hence, when people talk about kicking Russia off the SWIFT system, it’s not just that the transaction cannot go out. It literally means in practice nobody can send a message with Russian banks. Like, there was no communication. So the entire dollar system is based upon the SWIFT system, which 90 percent of the messaging to process the transactions are using dollar. And then, because the expansive power of our U.S. banks, it literally means all international trade literally has to be settled—the settlement has to be done by U.S. bank, who has U.S. dollars. And in order to access that transaction mechanism, only SWIFT can get the job done. You also have to literally tap into either the Fedwire System or the CHIPS system, which is the clearinghouse system based here in New York. So in order for this whole system—in order to have this whole system to make your dollar payment work, you literally have to maintain on the one hand a connection, on the other hand have connections with the dollar settlement system. And that’s why when Russia was kicked out of SWIFT, a lot of other countries who are not necessarily on the good side of the United States started to get worried because people used to think, well, kicking somebody—kicking some banks off the SWIFT system is almost the financial version of a nuclear bomb. It’s the nuclear option of cutting somebody from the international financial system, of which the U.S. dollar is the dominant currency, the primary invoicing currency as well. And then on the other hand, lesson learned from this sanction experience, especially from the perspective of China, is that, well, previously we’ve already laid out a lot of this planning system—meaning the infrastructure used to internationalize the renminbi, such as the China—the China’s CIPS system. Policymakers inside China started to wonder, well, since the planning is already there, it’s not too much to ask just to add additional function. So the previously, from a functional-wise, China’s renminbi payment infrastructure is really not about bypassing sanctions, because in my research I realized when—I interviewed people who actually participated in the designing of the system. And I remember talking to three people on three different occasions, and they all mentioned one point, which is without the CIPS system, the international using of renminbi, really—the user experience was really, really terrible. And the reason it was terrible was simply because there are more than two thousand of small and medium-size banks in China. You are familiar with the big four—ICBC, Bank of China and all that—but those are the major banks. More Chinese bank—more than two thousand of the smaller Chinese banks, they don’t have a direct connection with the SWIFT system. Which basically means in order to make transactions across border, it really takes time and the cost of transactions are extremely high. Therefore, in order to improve user experience, they literally had to design a system that can facilitate this cross-border transaction. But when geopolitics plays into it, especially since 2018 when U.S.-China trade war started to get really escalated to a higher level, a lot of those conversations started domestically. And then Russia’s invasion of Ukraine really accelerated this whole process. So I hope that sort of give you a broader—it’s a long answer, but I hope that gives you a deeper understanding of what has been going on, and what are the—what are the instrument—the functions of the instrument. FASKIANOS: Fantastic. I’m going to take a written question from Abraham—he goes by Abe—Borum. Dr. Liu, you mentioned OPEC within the context of NATO and the U.S. efforts to limit Russia energy policy. What are the second- to third-order effects on other sectors of global markets? And Abe is a graduate student at the National Intelligence University. LIU: Abe, that’s a great question, I have to say. And I would strongly encourage everybody here, especially our undergrad and graduate students—to think not just the first-order or direct impact, but also the second-order effect. So I appreciate this question, because then you give me a little bit opportunity to elaborate on why I think on the natural resource aspect our global economy is not necessarily heading towards the right direction. So just tie back into Abe’s question to begin with, right now since Russia’s invasion of Ukraine, the hydrocarbon prices, and more specifically oil prices, oil prices have been increasing. Although in recent—in recent weeks, it has relatively been stabilized a little bit, but it’s still way much higher than pre-pandemic, that would be 2019, right, Irina? 2019, right? (Laughs.) My timeline is all blurred. So I checked this morning, price might have changed slightly. But when I checked it this morning Brent today, this morning when I checked, it was trading about $88 per barrel. And remember in 2019 what the price was? That was something around—the average price in 2019, that was $64. So we are literally talking about more than $20 per barrel more expensive. And then WTI, that is, what, U.S. benchmark, right? WTI was trading at $96 per barrel – close to 96 (dollars). Like 95.99, something like that. And in 2019, Brent was trading on average $57 per barrel. So close to double. So higher energy prices, that basically would directly translate into higher production costs across the board for energy—because every sector need energy, whether it is electricity, whether it is other types of energy. So it directly translate into higher electricity prices. This is important for the United States. This is very relevant for the European Union as well. So higher production costs would literally raise the price of the output. And that is going to further exacerbate the inflationary pressure. And that is going to make the Federal Reserve, and the ECB, and the Bank of England measures to curb inflation even more difficult. And then on the other hand, I also wanted to mention that right now the added layer of geopolitics making this even more difficult. We already see this happening, which is, Biden made his trip to Saudi Arabia, but it did not get the intended consequence or intended result, which is trying to get Saudi Arabia and OPEC in general to stabilize the global oil market. And OPEC+, about a week ago, decided that they are going to cut their production by about two million barrels per day. That is about the daily consumption of, I believe it’s China, or something like that. So from that perspective, by limiting production, that is going to further—that is from a pure supply/demand perspective, right? If we hold supply—we hold demand constant and if you reduce the supply, that is going to further raise the upward pressure for the prices. So geopolitics is probably going to further put upward pressure for the prices as well. And then finally, the final point I would want to make there is that right now OPEC countries—OPEC+ countries in particular—they might be—have this existential threat, which is the net zero transition. Right now, what is most valuable for Russia, or for Iran, for UAE, for Saudi Arabia—their most valuable export comes from hydrocarbon. It could be oil. It could be natural gas. So in the long run, when the entire global economy moved to zero dependence on hydrocarbon, that basically means for Russia—that’s probably more close to 70 percent of their GDP and government revenue. That is going to be gone. Think about how the Russian economy can make up that much amount of revenue in the short run? That’s very difficult to think about, especially these days. And this can be applied for countries like Saudi Arabia as well. Therefore, these countries—these hydrocarbon-exporting countries—they have this existential threat. Which is their most valuable export might become no longer valuable in the long run. So that’s why they are—they are inherently very interested in carving a closer relationship and, more importantly, a relatively stable relationship with their stable buyers. And the buyers these days are going to not necessarily be the United States because, you’ve heard all these stories about the U.S. are energy independent and so on and so forth. But, you know, we can—that’s a different story. And when people say U.S. is very largely energy independent, there are so many reasons that argument can be rebutted. But let me just say, U.S. does not necessarily consume a lot of energy from—exported by Saudi Arabia. But who does? China and India. So right now, China’s largest energy—in terms of volume—largest energy supplier is Russia. But in terms of pure monetary value that China actually pays, and the largest receiver of Chinese money for energy, that is Saudi Arabia. Therefore, earlier this year you probably read the news about Saudi Arabia might consider allowing renminbi to pay for Saudi oil. There might be more opportunity in there, because they might be very interested, especially MBS, because of all his behaviors, might expose a lot of the Saudis individuals under U.S. sanctions. And on the other hand, China already established a renminbi denominated oil futures market. And that—although, the volume today is relatively—the volume today is relatively low, but the growth is very rapidly. So if all these major oil-exporting countries hypothetically—if they decided to suddenly switch their—the pricing of their oil overnight into renminbi instead of the dollar, we could potentially see the dollar’s pricing power and invoicing power in global trade would be diminished. And that is because the infrastructure, the facility is already there. Although the volume of renminbi-denominated oil futures is still relatively low, the plumbing is there. And once you have the plumbing there, there is no way to go back. So now what the United States should do is to make sure that everybody is still very much interested in maintaining the existing dollar-based system and maintaining the pricing of commodity using U.S. dollar. And that brings in the discussion about putting an oil price to Russian oil instead of just a wholesale sanction of Russian oil. As long as we are putting a price cap to it, that basically means we are—yes, we are hurting Russian export, but still we are allowing Russian oil flowing into the international market. That still makes the dollar’s pricing power in global commodities relevant. So from that perspective, I think it’s the right move to preserve the dollar system. But on the other hand, those countries that are not—again, not necessarily on the geopolitical good side of the United States, they do have the intention to hedge against the risk of being sanctioned. And they need the—they need buyers to buy whatever that they have are valuable today. I hope that makes sense to you. FASKIANOS: Great. Thank you. I’m going to take the next question, a spoken question, from Dr. Seebal Aboudounya, an associate lecturer at the University of College London. You can correct me on the pronunciation of your name. Q: Yes. Hi. The pronunciation is perfect. Thank you very much. So I have two students here from the international public policy program. And they would like to ask questions. So I will just hand over to them. Thank you. Q: Hi, professor. I’m Cici and I’m a graduate student from UCL. I’m really glad you can give me a speech and answer my questions. And I want to ask questions about Belt and Road Initiative (BRI). As we all know, that Belt and Road Initiative has employment more than ten years, since 2013. And it seems as the most important foreign policy for China and their President Xi. And it has already achieved many success. So I want to ask, what’s the core purpose of Belt and Road Initiative, and how can we evaluate it? And do the countries in BRI view it in a positive or a negative way? Thank you. Q: Thank you very much. And the second student will now ask a question. Q: Hi, Doctor. My question is, what’s the future of global economy under the impact of Ukraine war, China-U.S. competition, and COVID-19? Thank you. Q: Thank you very much. LIU: All right. Thank you very much, Professor Aboudounya. And let me just being with the first question from Cici, right? Thank you very much, Cici, for asking this important question. And I’m so glad that you are asking something about BRI, because I do think it’s important for people to understand this whole Chinese initiative. You are absolutely right that the BRI is a very important Chinese foreign policy initiative. And I would even say that the BRI is—or, the Belt and Road Initiative—is Chinese President Xi Jinping, his signature foreign policy initiative during his first two terms. Now he just recently got his—as the general secretary of the party—he just got this third term. So we’ll see how BRI being played out going forward. But at least during his first term as the president of China and as the party general of the Chinese Communist Party, that was his signature foreign policy initiative, or grand strategy, if you will. So in terms of what it is and how we think about it, those are great questions. So there are very simple answer to say—to describe what BRI is. You can think about it as a global-spanning infrastructure project. So that’s what it looks like. If you just put—if you just—if we have an Excel spreadsheet and we just look at, at least all the—every single project that BRI has been doing, it’s really about infrastructure. And more specifically, more than 70 percent of BRI infrastructure projects are related to energy, are energy-related infrastructure projects. Therefore, you can also think about BRI as infrastructure orientated and combined with the idea of establishing China’s access to global energy resources. And then, if you think about it from China’s domestic perspective, why Xi Jinping decided to start this BRI initiative and what are the connections of the BRI with previous Chinese policies? I would say the reason—fundamental reason why Xi Jinping started this BRI was because of the fundamental domestic problem which is the overcapacity in China’s production sector, especially steel, concrete, and a lot of these infrastructure-related sectors. And that takes place after global financial crisis, and then China’s spending four trillion—four trillion yuan to stimulate its economy, and it created the major overcapacity issue at home. And the international economy—or international demand or demand from outside of China was not enough—or especially the Western market like United States or European market, they were not growing as fast to be able to absorb China’s overcapacity. Therefore China really have to think about how to distribute in a broader global market to solve its overcapacity issue. So Xi Jinping, in one of his meetings, he had this saying—and I think it’s very revealing, so I quote him. So he did say this, and I translate it, obviously, into English. So he said: Our overcapacity problem might be other countries—might be beneficial to other countries. In other word, we are producing a lot of this stuff that we do not use, and we are losing money. But if we are able to sell it to other countries, that might be good for them and good for us, as well. So that was—could we—if we give him the benefit of the doubt, is that a good way—is that a good intent? Sure. If we give him the benefit of the doubt, if everything he implemented perfectly, that could be mutually beneficial. And indeed, if you look at all these BRI forums or BRI summit, a lot of these are related to improve their connectedness, solve overcapacity issue, and even BR specific government-to-government level industrial production coordination fund. In other word, if government are establishing lots of money to coordinate—so much you are going to produce, how much I am supposed to produce. The idea is really to tackle the problem of overcapacity. But again, reality when you are looking at how this is being implemented, nowadays it varies. There’s a very good Rhodium Group report that you probably—if you just google Rhodium Group BRI, they have this report analyzing the BRI lending. And that’s where BRI really come into—really encountered a lot of problem. So you are probably familiar with the whole narrative of the data trap, so depending upon who you are talking to—so if you talk with—if you talk to Chinese project managers, or if you talk to Professor Deborah Bräutigam at SAIS/Johns Hopkins who runs the China Africa Research Initiative—if you talk to folks like them, they might tell you, well, you know, it’s really not about the data trap but really speaks to the fact that China is really, really inexperienced in terms of the development finance and in terms of lending, and that the reason is that they really have a limited capacity to do, on the one hand, the environmental impact assessment. Many of these—you will be shocked. Many of these projects they do not even have a real environmental impact assessment. And on the other hand, because a lot of these lendings are directly being lent out by Chinese policy banks—and more specifically, if you look at Africa, that would be China import and export bank, they have a limited capacity to evaluate all these business plans. And I remember talking to a project manager in Mali, so I asked him, have you interacted with all those folks on how you do your—how you do your bidding in order to get the money. So this person, he was very frank with me, and he said, well, I understand how the—I understand how they want the number to look like in order to give me the loan, so I just cook the numbers so that I can get the loan. In other word, there is not necessarily an internally robust risk management process in getting out of these loans. Therefore, am I surprised to see that so much of Chinese—so much of China’s BRI loan now are in trouble, like in countries like Zambia, Pakistan, Sri Lanka, and a couple of others.   So am I—am I surprised about that? I’m not surprised because if you followed this and if you realized that there is a lack of the internal risk management process, that’s the result you are going to get. And it is also because of the debt, combined with the contract term, which is when you are signing a contract like—it’s like, I go to the bank and I say, I am Zoe, and I bank with Charles Schwab or Bank of America. Hey, I’m going to buy a house, so how about you lend me the money. This is literally the way how contract negotiating works. And then, guess what? The banks are going to say, hey, Zoe, I do not know who you are, although you look like a good person. I do not want to lend you the money at this rate. I’m going to lend you the money, and you have to put down a collateral. So collateral is the idea that, in case I, Zoe, can no longer pay back my loan, I literally have to give up some sort of tangible asset to the bank. Now in the case of Sri Lanka, that was what happened to Hambantota. So long story short, is that combined with the collateralization of this BRI debt really feeds this debt trap narrative because, well, if it looks like you are setting the countries up to debt, and you are collateralizing their critical infrastructures, this looks like debt trap to many observers. So I can’t—I have a lot of sympathy to this debt trap narrative, but really, when we think about BRI debt and how BRI is being implemented, we really need to think about two sides: on the one hand, the policy side; and the other side is really about implementation, because without implementation the policies are only a piece of paper, isn’t it? So, I really encourage you to look more specifically into the details, and if you are interested in learning more about BRI, there are a lot of data set that are available. On the one hand, William & Mary—William & Mary have the aid data. If you just google William & Mary and google aid data, you will see their entire data related to BRI. And then the other website that—I would have to say, my colleague and I here at the Council, we have this BRI tracker. My colleague Benn Steil, he run—he had this BRI tracker. So you can take a look at that. And then the Council also published a BRI report last year—last year, right, Irina? We have a BRI Task Force report, so definitely check that out. And then finally there is also Boston University has the global policy institute. They have this China—they have a specific China-oriented research team, and they have—they also run seminars occasionally, and webinars—you can sign up for it and you can have access to their research. We also have this BRI data, so make sure that you check those out so that you can look at all the contract, you can look at what are the—where exactly—at what level project are being implemented. I hope that sort of covered the ground for that with BRI. And then go back to the other question—the other question about the future of global economy, especially the impact on Ukraine. I really appreciate this question as well because it’s—it’s really dear to my heart, too, and the research in itself is dear to my heart and to many of my colleagues here at the Council. And then, on the other hand, we also—everybody are surprised about how fast and how coherent the sanctions on Russia were able to take place. It used to be like—I myself included—like when the Europeans decided—the European Union decided, basically the next day after—following the U.S. sanctions, they basically decided that they are going to do the same. I was like, oh, gee, looking across the Atlantic, I don’t think I understand you guys. It almost feel like you guys could never agree on anything anytime soon, but now, it’s like overnight there is this agreement on sanction of Russia. I feel like, oh, this is unprecedented. So from that perspective, I do think the—Russia’s war on Ukraine, it reunited the U.S. alliance system, and from economic perspective, I think it’s very important in the sense that a lot of the economic differences that we used to have—for example, the Eurozone or, in particular, the ECB might have interest in letting the euro play a bigger role in the global system and all that. So a lot of these are—a lot of these disagreement are going to be surpassed by the priority, which is to address Russia’s aggression in Ukraine. And then on the other hand, we are also seeing that, yes, European Union, despite of their heavy dependence on Russian oil and gas—and Russian gas in particular, they are willing to participate in setting a deadline to say by this—by the end of this year we are going to phase out Russia’s—our dependence on Russian energy. And in that context, it is good for American energy industry in the sense that we can—here in the United States we can—in the context of making sure that our domestic energy security is secured, right, or we can’t export our LNG to our—to meet the need of our European allies. So that is another good aspect of it, and then in terms of—and then finally, I would—along the line of energy I would also say this probably is also going to accelerate the transition to net zero in terms of technology and putting more resources into this technology related to energy transition. That might be related to hydrogen. Canada is already exporting its hydrogen energy to Germany and German trains are now—some German trains are now run on hydrogen power. It would be cool to check it out—how it looks, right? So that means, from energy perspective at least we are seeing the realignment of this energy supply, energy demand dynamic. And because energy is so important for production and for energy growth, that is sort of a stabilizing factor. But that being said, still we are not—I am not saying that the Europeans aren’t going to—are no longer having problems. And the Europeans are still going to have problems and the IMF revised downward European growth prospect next year. They downgraded to—even further to a lower point. I believe it’s point—it used to be—it used to be about 1.3 in the energy outlook earlier in July, but I think this time—a few days ago when I checked again, there are new economic outlook. They’ve revised it down for EU—European advanced economies that it was revised down to .06 percent growth. From that perspective combined with high inflation, literally we are seeing that Europe—the advanced European economies—or broadly speaking, Eurozone as a whole—probably are going to head towards, maybe recession is a very, very harsh word, but it definitely going to run into serious economic troubles. So in the long run, this is not a good—this is not good looking. And in the short run, at least, this is not good looking, right, and in the—if we broaden the horizon back, focusing on the economy. Another factor that constrained European growth are, in particular, let’s say, the major powerhouses like Germany. A critical part of that is, they are suffering from two issues. One is their cost of electricity is simply too high, and I’m talking about this relative to—it’s much higher than the United States for sure, but they are not—they are much higher than China, as well. So China energy per kilowatt is in the magnitude of 0.002 or 0.003 magnitude. And where is Germany? Germany is something like ten times of that. We are talking about .38 per kilowatt. So that basically means if your fundamental electricity cost is high, and when energy price goes up higher, electricity price is also going to go up high, and then your entire manufacture industry is going to face a higher cost. And that, combined with demographic challenges, refugee challenges, it simply means that the government are going to have a whole lot of difficult time to deal with their expenditures. So again, both from energy perspective, from cost-of-production perspective, from the demographic perspective—aging population, refugee problem—and on top of that you probably would also have to think of—take care of the aging population, meaning added social welfare costs and pension costs, so those are—those mean slowing economy, especially on advanced economies, are not necessarily looking nice. FASKIANOS: Thank you. I’m going to go next to Isaac Alston-Voyticky, who has written a question but also said, happy to ask it, so why don’t you unmute yourself, please, and give us your affiliation. Q: Hello, my name is Isaac Alston-Voyticky. I am at CUNY School of Law and CCNY’s Colin Powell School. I am actually graduating this semester, so—(laughs)—anyway, so my question is you posed the three classic core components of economics. Would you think in the modern day, given the immaterial nature of so much of our global market and marketplace, that knowledge as the foundation of neoclassical economics, plays an equal role as a component of modern economics? And I mean that obviously in the concept that knowledge is known, unknown, real, surreal, and unreal, of course. But also, to your first kind of opening point when you said that, you know, it’s really hard for economists to model out and do predictions. When we talk about improving data sets and analysis across like IPE, international affairs, you know, implementation of international law, one of the issues we have is a lot of our economic models are still too variable-based, and that we haven’t really gone past that. So if we think about it from the quantum computing, we have X, Y, Z, and T, and that’s just your bare, you know, next level. And I would imagine we can do that if we find the right components so, hopefully—and, I mean, I don’t know what kind of answer you have, but I’m very interested to hear. LIU: Yeah, Isaac, first of all, congratulations for getting—you are in CUNY, right? And so you are right here in the neighborhood, so you know—right? So feel free to—feel free to, on the one hand definitely check out our award-winning website, and then if me or our colleagues could be of help, just feel free to stop by. And so these are two great questions obviously, and you touch upon a lot of the complaints and the frustrations that I have with modeling—(laughs)—right? So the first question, knowledge, I fully agree with you that so far our economic models have not been able to fully appreciate, or fully absorb, or fully model the role of knowledge; for that matter, even finance. Finance, at least has this term called the intangible asset when you are evaluating a firm, and therefore your mergers and acquisitions, you pay the so-called goodwill based upon how much you value the intangible asset; meaning like knowledge, expertise, and so on, so forth—so patent and all that. So from that perspective, I think the knowledge is definitely going—knowledge is definitely going to be extremely more important going forward, and I say that both—from three aspects. The first is knowledge can improve the quality of your human resources, which touch upon basically the labor force which reverts back to one of our three factors of production. And then knowledge also is necessary for technology, and that is another factor of production. And then finally the other would be knowledge, technology, and other resources. So resources, there is capital and non-capital, meaning natural resource and all that. And there are—then the confounding factor of knowledge is being played more here because better financial expertise—well, obviously, depending upon how you use it, but sometimes, financial expertise tend to run itself in trouble. It outsmart itself; it’s not necessarily good. But if we are able to—if we have better knowledge about financial market, about our debt—I go back to your second question—better data about financial market and better knowledge to improve our use of natural resources or the efficiency—improve the efficiency. Or the next day, if we all have a battery and move toward renewables—these are going to be extremely—go back to the Schumacher model—these are going to be extremely disruptive, but in a very good way. But the reason I am cautious about, you know, we may not necessarily going there overnight is because, on the one hand—technology R&D takes some time, it’s expensive, but then on the other hand, it’s just in the processing, the implementation part. It’s really—a lot of geopolitical factors plays into it because when we think about knowledge, knowledge and the technology, those are the things that we tend to think they tend to diffuse themselves, like knowledge—you exchange knowledge, and that’s the foundation of new knowledge being created. You stand on the giant’s shoulders, right? Knowledge and technology tend to diffuse itself, and right now what we are observing is, on the one hand, there are a lot of—there are a lot of export controls towards certain countries, and then on the other hand, countries like China are also—are trying very hard to lower the cost of the relatively cheaper technology, right, or the less advanced technology. And that basically means if a country can or—especially a country like China can quickly achieve economies of the scale, are able to find an alternative that is cheaper but at a lesser technology, but will still get the job done, then probably that—in the short term, it can service China and also service a lot of developing economies. But for a country like China, that is not necessarily good in the long run. And then on top of that, because of export controls, because of a lot of geopolitical tensions between China and the rest of the world, but the long-run trajectory over China’s indigenous development capacity is still there; China’s people—there are still U.S.-trained Chinese scientists going back to China, but it is going to tremendously slow China down and making it very difficult and very costly. So if we think that, for the past forty years or so—or for the past twenty years since China joined WTO, if we believe that cheap Chinese goods tend to be—tend to benefited the rest of the world in many ways, then a slowed-down Chinese economy is bad news for the global economy, probably more true than not. China is the largest trading partner for more than 120 countries in the world, so if Chinese economy slow down, that have major ramifications for the rest. And then go back to your second question with regard to, you improve the database and in terms of modeling the limitations—that’s a frustration that I have nowadays. Yes, the model themselves—oftentimes I go into a meeting, listen to a talk—especially in the econ papers, the econ paper would begin with—it’s very sterilized. You begin with assumptions, and then you talk about your independent variables, your dependent variables. Right now we are really in a world where your independent variables can be—your independent variables might be suddenly changed because of geopolitics, or because of some disruptive technology, or simply because supply chain means you used to be able to get rare earth, but then if you are Japan in 2007, you were no longer able to get rare earth reliably from China. So those are going to significantly shift your calculation. Therefore I would say, I really don’t have a good answer in terms of how to improve at researcher perspective, but hopefully, as you said, quantum computing, artificial intelligence might help us to get as much better information as possible. But that being said, quantum—a lot of these quantum computing and artificial intelligence is—it used to be the case that a lot of statistics are garbage in, garbage out. Hopefully, our AI and the quantum computing, as we train themselves, they can learn better than the human beings. I’m not exactly comfortable about saying that, but that’s my hope. FASKIANOS: I have some—a written question from Todd Barry, adjunct professor at Hudson County Community College in New Jersey. Is it possible that China would turn inwards and switch an economy to import substitution industrialization, producing all goods domestically, without imports, like Latin America tried to in the 1970's? LIU: Right, that’s a great question, and when you were asking that I was immediately thinking about the Chile and its car industry. And that was a disaster. The East Asian model, in terms of the import substitution—that’s the East Asian miracle, especially applicable to, Singapore, Taiwan, Japan, South Korea to a certain extent, as well. In the case of China I would say I would be really hesitant to—in retrospect if we have this conversation twenty years down the road, I would be really, really—I would be really sad to realize that this year is the moment—or October is the—October 2022 is the moment when China started to turn inward because that is going to be disastrous for China’s long-term growth. China’s decade-long of double-digit growth benefitted from an open economy, benefitted from being able to trade with the rest of the world, and the United States actually welcomed China into the global system. Therefore I would be very, very sad to see this is the moment. Now is there a—is there the risk? I do see the risk, and I do see the narrative there, especially with President Xi Jinping’s emphasis on domestic circulation. If you think—I would argue—in my latest publication with the CFR.org, I made this argument to say the important—the dual circulation, especially the domestic circulation, it is a departure from previous going-on strategy because going out is starting from Jiang Zemin to Hu Jintao. These are really the idea of prioritizing the international market. It’s really about using international market to develop the Chinese economy. And dual circulation is a departure from that. It’s not to totally abandon globally—the global market, but it really is—it prioritizes domestic market: domestic demand, domestic supply, domestic technology and—domestic technological innovation capacity, and making international market relatively supplementary. And if even—and Xi Jinping even—if Xi Jinping even intend to make the international market more dependent on China’s domestic market, meaning making the rest dependent more on China. So there is the narrative there. However, in practice, I don’t—I don’t see how Chinese companies are able to do this because the Chinese company—a lot of Chinese companies, especially multinational Chinese companies, they still need to have access to global capital, global technology. And although it becomes—especially on the technology side has become increasingly difficult. But it is to the benefit of the Chinese company, Chinese people, and China’s long-term growth potential to maintain an open economy. But there is the chance that might not happen, and if we think—if we do believe that Xi Jinping has a timeline with reference to Taiwan, then he—obviously, if there is a war breaking out, then obviously there will be consequences, and we can imagine Western sanctions, and that basically means the Chinese economy is going to be severely isolated from the global system. So from that perspective, right now a lot of these zero-COVID policies are very much—the way that I think about it is it could be interpreted as it’s a drill, or it’s a preparation to make sure that China is developing internal capacity to be able to absorb as much sanction shock as possible. But I don’t think that—I do not think Xi Jinping is going to make up a decision and going to make a move to Taiwan, say, tomorrow. As long as we can kick the can down the road, I think that’s good. FASKIANOS: Out of time, and I am sorry to say that we couldn’t get to all the questions, but we appreciate it. Zoe did mention a few resources that our task force on the Belt and Road Initiative, as well as the Belt and Road tracker—we dropped the link in the chat, but we’ll also send a follow-up note with links to some of those things. She also does a lot of writing on CFR.org In Briefs and articles, so you should go to CFR.org. And you can follow her on Twitter at @zongyuanzoeliu. So I encourage you all to do that. This has been a terrific hour, so thank you again, Zoe. We appreciate it. LIU: Thank you, Irina, for having me. And I really do appreciate this opportunity to engage with every participant here. If I did not get a chance to answer your questions, or if you have other questions, just feel free to reach out to Irina or feel free to reach out to me. We are here, and the Council really appreciate and the—really appreciate the colleges and student, and the Council actually—we do a lot of stuff related to education, you know—not just at a college level. We also do at high-school level— FASKIANOS: High school— LIU: —middle-school level, and even—we also even have games for kids. So if you haven’t tried those out yet, just try it out. FASKIANOS: Thank you, Zoe. So our next academic webinar will be on Wednesday, November 9, at 1:00 p.m. (EST) with Lauren Kahn, who is here at the Council, on military innovation and U.S. defense strategy. And again, I just wanted to shout out. We have our CFR fellowships application deadline for educators is available. You can check it out at CFR.org/fellowships. The deadline is October 31 so it’s right around the corner. Follow us at @CFR_Academic. And again, go to CFR.org, ForeignAffairs.com, and ThinkGlobalHealth.org. So thank you all for being with us. Have a great rest of your day. (END)
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