On February 25, 2021, Chinese President Xi Jinping announced China had secured a complete victory in its fight against extreme poverty. Globally, though, 685 million—one in 12—people still suffer poverty that is even more severe.
The global financial system is, in the words of UN Secretary General António Guterres, "morally bankrupt. It favors the rich and punishes the poor." Hopes were high the world's people would come together to demand the eradication of extreme poverty through the 17 global Sustainable Development Goals (SDGs) announced in 2015 as part of the UN 2030 Agenda. However, as of yet, this hasn't happened.
But an alternative vision does exist, one that envisages a community with a shared future for humanity and would involve "countries with different social systems, ideologies, histories, cultures and levels of development coming together for shared interests, shared rights and shared responsibilities in global affairs, and creating the greatest synergy for building a better world." Scholars and politicians schooled in the neorealist tradition of international relations, on which states must compete for supremacy, might regard this vision as utopian. Yet it is the core of China's foreign policy as presented by President Xi at a conference marking the 50th anniversary of the restoration of the People's Republic of China's lawful seat in the UN in October 2021. Before considering what this alternative vision might entail for global poverty reduction, it is important to understand the structures and forces that have till now prevented greater reductions in global poverty.
A biased system
The reigning neoliberal framework has long advocated small governments, strong private property rights, and free trade and markets, in turn leading to the "structural adjustment" policy as implemented by the World Bank and the International Monetary Fund (IMF). This made financial assistance to developing countries conditional on the privatization of state-owned enterprises, deregulation of their economies, trade liberalization, "competitive" exchange rates and the elimination of barriers to foreign direct investment. Developing countries were therefore obliged to engage in globalization and to do so from a position of economic weakness.
Despite minor amendments, this system remains in place. It has arguably facilitated the globalization of world trade—credited with stimulating global economic growth and reducing poverty in the last 40 years. It provided the environment in which China, through reform and opening up starting in the late 1970s, grew to become the world's second largest economy.
However, the neoliberal economic system continues to penalize developing countries. The World Trade Organization (WTO), the global body nominally intended to police fair trade, for example, fails to do so. Instead, it provides nominal legitimacy to trade practices that discriminate against developing economies, similarly supporting the imposition of high tariffs on processed goods exported by low-income countries. Moreover, its appellate body established to rule on trade disputes no longer functions because the U.S., having lost several appeals, refuses to approve new appointees. While supposedly committed to open markets and free competition, the U.S. has imposed embargoes on Chinese trade and employed domestic legislation to prevent other nations from going into business with China.
The UN's commitment to eradicate extreme poverty and to half other forms by 2030 under the SDGs was premised on a fundamental WTO reform—the so-called Doha Round which commenced in November 2001 with the objective to lower trade barriers around the world, thereby facilitating increased global trade. But the proposition proved a non-starter; wealthy countries were simply unprepared to change a system that massively favored them. This one fact alone already makes the SDGs unattainable.
A just substitute
In marked contrast to the prevailing geopolitical system that presents economic competition as a surrogate war to achieve global domination, President Xi delivered a report to the 20th Communist Party of China (CPC) National Congress on October 16 with a call to "let us all join forces to meet all types of global challenges." He continued by reiterating China's commitment to its "national policy of opening to the outside world" with a view to create "new opportunities for the world… and to contribute its share to building an open global economy that delivers greater benefits to all peoples."
This is no new commitment. Xi has expressed similar aspirations in many previous addresses. Indeed, such benevolent developmentalism reflects the Confucian tradition of wangdao, or the "kingly way of governance," basically meaning the strong care for the weak.
And action speaks louder than words. China responded to the 2008 global financial crisis not by austerity, but by mounting the world's largest expansionary stimulus package that was sufficient not only to ensure its economic recovery, but to protect much of the developing world.
China has provided infrastructure investment for other developing countries under the Belt and Road Initiative, an initiative it proposed in 2013 to boost connectivity along and beyond the ancient Silk Road routes. True to its word, it has not constrained the fiscal space of recipient governments by insisting on ideologically driven policy changes.
Responding to the COVID-19 pandemic, China began shipping vaccines globally well before its own population was fully vaccinated and has, so far, directly delivered more than 2.2 billion doses to more than 120 countries and international organizations. It also donated vaccines to the COVAX facility, the global mechanism for pooled vaccine procurement and equitable distribution co-sponsored by the World Health Organization. Now, with developing countries hit by COVID-19, the Russia-Ukraine crisis generating rising food prices and a growing global debt crisis, China is providing the necessary liquidity financing.
Just as it did during the great recession that tormented the world between 2007 and 2009, China has once again been supporting major emerging economies with loans and currency swaps, helping their governments to manage the impact of these exogenous events. Many governments have also had to cope with international investors withdrawing their funds in a bid to protect the value of their portfolios—irrespective of the impact on local poverty rates.
China eradicated extreme poverty—SDG Target 1.1—a decade ahead of schedule. Following the 20th CPC National Congress, domestic attention now shifts to achieving common prosperity, a concept that embraces SDG Target 1.2, namely, halving poverty in all its dimensions. But China's vision of "building a community with a shared future for humanity" also encompasses, as Xi has often emphasized, "achieving common prosperity for all." The Global Development Initiative (GDI), designed to speed up the implementation of the UN 2030 Agenda, bears testimony to this worldwide commitment. Launched in September 2021, it focuses on poverty alleviation, food security, vaccination, and development, demonstrating China's commitment to cooperating with international agencies.
The GDI also aims to improve the global governance system, increase the representation of emerging markets and developing countries, and build an open world economy. It therefore reflects President Xi's vision for China to play an active part in the reform and development of the global governance system. China, in Xi's words, "upholds true multilateralism, promotes greater democracy in international relations, and works to make global governance fairer and more equitable."
Many experts believe global poverty can only be eradicated by shifting the balance of strategic power from the IMF, World Bank and WTO, controlled by the developed world, to the UN—the only body with universal representation.
Poverty results from the moral bankruptcy of the global financial system. The only way to address it is by pursuing China's goal "to make global governance fairer and more equitable."
(Print Edition Title: The moral alternative)
This is an edited excerpt of an article first published on the China Focus website. The author is a professor at Beijing Normal University and a 2021 fellow at the Shorenstein Center on Media, Politics and Public Policy, Harvard Kennedy School