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Economic diplomacy brief: Trump turns global, Pacific aid, Chinese tourism, and more

It appears China’s economic policy-making elite (if not always Xi Jinping himself) like the certainty and stability of the Bretton Woods system.

The Great Ocean Road, Australia (Photo: Michael Sanders/Flickr)
The Great Ocean Road, Australia (Photo: Michael Sanders/Flickr)

Davos men

With the North Korean nuclear threat seemingly sidelined until after the Winter Olympics at least, this geopolitical year is starting in a curiously similar way to last.

US President Donald Trump will share more than a dubious hairdo with Chinese President Xi Jinping next week when he turns up (like Xi did this time last year) at the World Economic Forum (WEF) in Switzerland.

The two main self-styled challengers to the half centuryold Washington Consensus both find it necessary to put their alternative visions to the annual cocktail party of globalisation's economic elite. This suggests that the basic ideas underlying the Bretton Woods system of institutional globalisation still have considerable attraction, despite big challenges such as Trump's assault on the World Trade Organization and Xi's Great Firewall.

Indeed, there is much to suggest that China's economic policy-making elite (if not always Xi himself) quite like the certainty and stability of the Bretton Woods system, so long as China can get its name on a few new institutions. And while the 'America First' rhetoric is not going away, Trump has yet to produce a coherent alternative to the global economic system the WEF symbolises.

Nevertheless, the rather gormless assertion from US Treasury Secretary and former Goldman Sachs banker Steven Mnuchin that Davos is not a 'hangout for globalists' suggests the WEF might be in for another display of mixed messages from the Trump Administration team.

But amid these mixed messages, it is worth reflecting on whether all the gushing over Xi's pro-globalisation speech made this time last year at Davos might only have encouraged him to take a more assertive global approach.

Fork in the road

It says a lot about how the mood has shifted on China's approach to globalisation that even the International Monetary Fund is raising concerns about the way the country is funding projects in developing countries. Deputy Managing Director David Lipton used a speech in Hong Kong this week to make the point that 'some developing countries may face unsustainable debt burdens if recent [Chinese] lending trends continue'.

If Australia's International Development Minister Concetta Fierravanti-Wells had taken an extra week of holidays before launching her freestyle 'road to nowhere' attack on Chinese aid she could have noted how Lipton dealt with the difficult but nonetheless welcome reality that the world's second-biggest economy is also a rising development funder.

Lipton argues that China needs to see its aid in the context of the broader debate over globalisation (from which China clearly benefits) and have a framework to avoid creating a new debt crisis in the developing world.

While Fierravanti-Wells was right to observe that some Chinese aid is low-quality, this is a case where Australia must work with the changed neighbourhood reality rather than hanker for a return to the past (see Jonathan Pryke here).

Long march

The Australia China Business Council report on tourism last year raised concerns about lack of infrastructure in regional areas to deal with China becoming Australia's biggest source of inbound tourists.

It's a valid concern; however, it is clear from my holiday-season ritual of visiting family across western Victoria that this lack it is not stopping the emerging, so-called free and independent traveller (FIT) cohort from China hitting the road in country Australia.

This meant I was not only on the spot for the slow news day controversy over selfies taken along the Great Ocean Road, but also found myself lining up to pay for petrol alongside those same FIT travellers. This may well be a new gold rush for towns with a China engagement strategy, such as Warrnambool.

My personal nomination for an Australian tourism award is the former Guangzhou family I met on the edge of Mount Gambier's Blue Lake, 1200 kilometres by road from their home in Sydney. Although the family only came to Australia eight years ago, their three-day visit to South Australia meant they have now holidayed in every Australian state and territory. How many Australian-born residents can claim that?


China isn't the only game in town, but each passing year sees another record broken on the road to that provocative chart in the Foreign Policy White Paper that shows China growing over the next decade by more than the entire current size of the US economy. This year retail sales in China are expected to equal or surpass sales in the US for the first time, which will be the new elephant in the boardroom for Australian business.

But the most significant benchmark set to fall this year is the US' status as the world's biggest venture capital market. In 2017 the bulk of global venture capital investment growth occurred in Asia, with the region's total almost overtaking that of the US for the first time.

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