Forum founder says 'no other choice but to act collectively and responsibly'

Editor's Note: With the ongoing EU debt crisis, a rating downgrade in US sovereign debt and turmoil in the international capital markets, the world is now facing up to the possibility of another economic crisis.

Now as never before, people are hopeful the annual gathering of the World Economic Forum in Dalian will provide a clearer picture of the world economy and find ways to address the most pressing issues.

Before the forum, China Daily reporter Hu Yuanyuan spoke to Klaus Schwab, the founder and executive chairman of the World Economic Forum, and a number of other participants about their expectations for the forum and their viewpoints on the latest advances in their own fields.

Some believe that the world is likely to slide into recession again. What's your opinion? What are the new challenges facing the world economy?

The debt problems will remain a significant burden for the economies of the US, Japan and most European countries, and a major concern for China and others.

Many experts are forecasting very little economic growth, or more realistically, stagnation and a possible long-lasting recessionary environment.

As a result, many may predict a lack of trust in the future, undermining economic dynamism. That is one of the main short-term challenges.

As our latest Global Competitiveness Report shows, developed economies like the US are stagnating in terms of competitiveness while emerging economies are catching up.

So there will be areas of growth and areas of continued slowdown.

But looking more long-term, I think the recent crises illustrate just how unbalanced the world has become, lending tremendous concern about the future of our economic and financial systems.

Global imbalances are not new, but the current levels are unprecedented and have never been more precarious.

Economic imbalances prevail partly due to the willingness of developed countries like the US and certain Euro-zone countries to stimulate economic growth and incur greater debt.

If the world economy slides into recession again, what role should China play?

China plays a crucial role in the current context. The world economy clearly needs China, and China also needs the world's economy.

There are only a few areas in the global economy where growth is still occurring - even if the growth rates are slightly lower than in previous years, China remains one of the main engines of growth in the global economy.

With other major economies slowing, China's influence in the world becomes even more pronounced.

But with China's position as well as the rise of other emerging economies come new responsibilities and the need to restructure the economic model to be less export-dependant and more reliant on internal consumption.

In addition, as emerging economies become larger consumers of natural resources, they can also lead the way in terms of making their industries much more resource-efficient and create new "green" industries that are catalysts for new economic opportunities.

You have suggested that traditional notions of economic growth and global competitiveness should be revalued in terms of quantity and quality. How is China doing?

The last several years, particularly the last few months, have shown that the relentless pursuit of growth in the absence of qualitative and temporal considerations can lead organizations and even nations to overextend themselves.

Misguided incentives, weak regulatory oversight and complacent governance can further exacerbate problems and encourage operational "short cuts" that fail to recognize the importance of social equity and environmental sustainability.

So when re-thinking our old notions about economic growth, it is really about how to make economic competitiveness sustainable in the long term - economically, environmentally and socially.

We need to embrace a more holistic approach to global economic development as China is planning to do based on its 12th Five Year Plan.

We can't focus exclusively on growth rates. We must include the quality of economic growth as a key factor. It will require shifting the focus away from merely making more products and services cheaper to ensuring that products and services will improve quality - not only quality of growth but also quality of life.

After successful and rapid industrialization, China has recognized that quality growth should be a central component in its economic planning.

Emphasis on renewable energy and increasingly taking environmental factors into consideration in business planning are good examples of the kind of quality growth that will most likely characterize the next economic cycle in both China and the rest of the world.

Making the shift to a green and low-carbon economy will be a key part of this sustainable future if global challenges like climate change are going to be effectively addressed.

You've mentioned that the Washington Consensus is no longer accepted as the baseline model for economic development. Could the so-called Beijing Consensus replace it?

We are currently in the middle of a major transformation. The crises of the recent past have made everyone realize that our old models and policy tools are no longer useful for solving our current problems. We should recognize that we live in a new reality.

The context for global cooperation, for national policies and for business models, has substantially if not fundamentally changed.

I think it is too early at this stage to single out one model or consensus that will emerge as the dominant one.

But it is clear that whichever dominant socio-economic philosophy does emerge, it will need to focus on quality growth. This is what I mean when I say that we need to embrace a more holistic and sustainable approach to global economic development - the quality of growth, and ultimately the quality of life for people, needs to be the focus of this new economic cycle.

China Daily

(China Daily 09/14/2011 page39)