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Time to revise old ideas of economic security

By Jiang Yong (China Daily)
Updated: 2008-07-01 07:56

The economic security of a country refers to the subjective impression and objective state of the sovereign country that its economic interests are not under threat from internal and external factors and its national economy maintains a relatively stable, balanced and sustained development.

For a country to preserve its economic security, the following conditions should be met. The country enjoys an independent economic sovereignty, which not only embodies its jurisdiction and governance of its territory, but more importantly, also embodies its independent decision-making on domestic economic affairs. Among the two, independent decision-making is the key. The country enjoys reasonable protection in its environment, and a stable supply for its normal resources demand and an effective market guarantee for economic development. The country enjoys relative control on internal contradictions, political stability, and a steady and sustained buildup of its economic foundation. The country enjoys a basic balance in its general supply and demand, and a coordinated and reasonable economic structure, and its key industries enjoy continuous strengthening of international competitiveness. It enjoys an international political and economic order beneficial to itself, faces no direct threat to its politics and economy, and the process of its economic development can withstand impacts from the world's economic turbulence. The country's enterprises enjoy a sharp edge in international competition and its government enjoys a strong macro-control and governance ability.

Currently, China's economic security situation allows no optimism whether in terms of macro decision-making, industrial competition or micro enterprise development, all of which constitute the three dimensions of economic security of a country.

As far as macro decision-making and even legislation are concerned, all kinds of powerful interest groups, especially those overseas, have had increasing influences on these two areas. This will inevitably affect China's reform and opening-up initiative, weaken to different extents its macro-control ability, and compromise government authority.

With people's living conditions improving, demands for grains, water and mineral resources have also been on the rise worldwide. Due to a shortage of natural resources and their unbalanced distribution, there have also been an ever-aggravating scramble between countries for natural resources. With a large population, China's per capita occupation of resources is lower than the world's average. The country's sustained and rapid economic development has also contributed to its mounting demands for resources. The conflict between the scarcity and unbalanced distribution of its natural resources and its ever-increasing resources demand has put China's economic security in a challenging position.

A review of global economic development tells of a kind of capital operation model: industrial capital is driven by commercial capital, which, however, is manipulated by financial capital.

When implemented in the concrete economic structure, another picture arises: manufacturing industry is controlled by circulation industry, which, however, is under the control of financial industry.

Getting down to China, the situation is that the monopolistic market status of foreign capital is squeezing the profit of its manufacturing industry.

The international economic order and competition configurations fully manifest that financial industry is the core of the modern economy. And thus financial security has evolved into the core security of a country as financial competition has become the core of competitions between countries in the world. Financial strength decides a country's strength.

Currently, China's reform and opening-up process and social development have entered a crucial period, with its domestic economic and social contradictions mainly focusing on the financial industry.

The country's financial industry, although appearing vigorous because of reforms, is still a problems-fraught sector.

As the subjects of the market, the enterprise and individual are also key to economic security.

As far as enterprises are concerned, it mainly refers to their ability to participate in international division of labors and international competition. Due to the control of intellectual property right (IPR), key technologies and sale channels by the foreign-funded enterprises, many Chinese-funded enterprises have to succumb to trans-national companies and, as a result, only become a link in their international production and supply chains.

The significance of individuals to economic security mainly centers on their consciousness of economic security and their ability to safeguard economic security in relevant fields. Misled by economic prosperity over some time, many in the Chinese intelligentsia harbor a weak understanding of international competition and crises.

Since the reform and opening-up, China's economy has witnessed rapid development, and its comprehensive national strength remarkably improved. Its international competitiveness has also been on the steady rise. But compared with developed countries, China is still lagging behind in many aspects.

Due to complicated changes in international circumstances, uncertain factors that influence the world's peace and development has been on the increase. The situation in which developed countries enjoy advantages in economy and science and technology will not change for a long period in the future, and unbalanced development in the world's economy will further deteriorate. The competition involving resources, the market, technology and talents will become even harsher. Trade protectionism has embodied some new tendencies.

All these factors such as, to be specific, the US economic hegemony, the turbulence in international financial market and the impact of international idle funds, ever-aggravating conflicts in trade and IPR, the struggle for world resources and fluctuation of their prices and cross-border crimes, will directly or indirectly affect the external environment of China's economic security.

How to improve economic security has posed to the country a pressing challenge to examine and tackle.

The author is a researcher with China Institute of Contemporary International Relations

(China Daily 07/01/2008 page8)