World Economic Forum: China vows to support free trade

Key Concepts

• Multilateralism: The principle of international cooperation and collaboration, particularly through international organizations.
• Free Trade vs. Fair Trade: Debate over unrestricted trade (free trade) versus trade with regulations to ensure equitable benefits (fair trade).
• Economic Globalization: The increasing interconnectedness of national economies through trade, investment, and information technology.
• Dual Circulation Strategy (China): A Chinese economic policy focused on boosting domestic demand while maintaining international trade and investment.
• New Qualitative Productivity (China): China’s focus on achieving economic growth through technological innovation and increased efficiency.
• Comparative Advantage: An economic theory suggesting countries should specialize in producing goods and services they can produce most efficiently.
• De-risking: A strategy employed by countries to reduce dependence on potentially unstable or adversarial economic partners.

China Advocates for Global Cooperation at World Economic Forum

Chinese Vice Premier Hurle Fang, during a keynote address at the World Economic Forum in Davos, strongly advocated for greater international cooperation and warned against the detrimental effects of trade wars. Fang asserted that “we should firmly support free trade and jointly promote a universally beneficial and inclusive economic globalization,” emphasizing that globalization, driven by specialization and mutual benefit, has historically yielded positive outcomes for many nations, including China. He directly countered protectionist policies, stating that “tariff and trade wars have no winners,” as they increase production costs, fragment the global economy, and disrupt resource allocation. The speech also highlighted China’s commitment to boosting domestic demand and further opening its economy.

Panel Discussion: Global Perspectives on Trade and Economic Tensions

Following the Vice Premier’s address, a panel discussion featuring experts from Germany, the United States, and China provided diverse perspectives on the issues raised. The discussion centered on the importance of multilateralism, the current state of the global economy, and escalating tensions between the US and its allies.

China’s Role in Defending Free Trade

Victor Gao, Chair Professor at Such University in Beijing, argued that China has become a “real standard bearer of free trade” and that defending free trade is not only in China’s interest but also in the interest of “mankind and all countries in the world.” He emphasized that free trade benefits all parties involved and cautioned against weaponizing tariffs for political gain. Gao further asserted that most countries, including the US historically, have benefited from free trade and that the current US stance is an anomaly. He predicted that escalating trade wars would ultimately antagonize the global community and lead to widespread support for free trade, even among the American people.

China’s Economic Performance and the Dual Circulation Strategy

Shu Xiang, Assistant Director of the International Monetary Institute at Renman University, highlighted the positive trajectory of the Chinese economy. He noted that China met its annual growth target of 5% in 2024 and surpassed the 140 trillion yuan threshold for the first time. He described this as a “phenomenon” of modernization, unprecedented in history given China’s population of 1.4 billion. Xiang attributed this success to strong leadership, a focus on serving both domestic and global markets, and the implementation of the “dual circulation strategy.” This strategy aims to stimulate domestic consumption while simultaneously expanding international trade, particularly with countries seeking stable supply chains. He also emphasized China’s commitment to supporting developing nations through access to renewable energy and high technologies.

US-Europe Tensions and the Threat of Tariffs

The discussion also addressed escalating tensions between the United States and Europe, specifically President Trump’s pursuit of acquiring Greenland and the threat of imposing 10% tariffs on European countries. Olrich Brookner, a professor of European studies at Stanford University in Berlin, characterized the US actions as an “abuse of an instrument in trade negotiations” and likened it to an “imperialist attack” on a partner. He warned that yielding to US demands would only encourage further aggression, drawing a parallel to “game theory and watching mafia movies.” Brookner emphasized the European Union’s commitment to multilateralism and its willingness to “flex muscles economically” if necessary.

The US as a Principal Source of Global Risk

Anthony Chan, a former chief economist for JP Morgan Chase Company, referenced a report by the Eurasia Group identifying the United States as the “principal source of global risk” in 2026. He expressed concern that the US’s protectionist policies and unpredictable behavior were undermining global economic stability. Chan highlighted the economic inefficiencies of tariffs, citing a study by the Kiel Institute which found that 96% of US tariffs were ultimately paid by US entities, either corporations or individuals. He warned that escalating trade disputes could reverse recent gains in global economic growth, which the IMF had just raised to 3.3%.

Canada-China Trade and Shifting Alliances

The panel also discussed the recent trade agreement between Canada and China, which will allow Chinese-made electric vehicles to be exported to Canada. Victor Gao characterized this as a “landmark event” and a “turning point” in China-Canada relations, suggesting that Canada is recognizing the benefits of engaging with China independent of US pressure. He outlined ambitious goals for increasing trade between the two countries, aiming to surpass Australian exports to China and achieve a balanced trade relationship.

Key Arguments and Perspectives

• China’s Perspective: China views multilateralism and free trade as essential for global prosperity and believes it is now a leading advocate for these principles. It emphasizes its commitment to both domestic economic growth and international cooperation.
• European Perspective: Europe strongly supports multilateralism and views the US’s protectionist policies as detrimental to transatlantic relations and global economic stability. It is prepared to respond forcefully to US tariffs if necessary.
• US Perspective (as presented by Chan): The US’s current trade policies are creating significant global economic risks and are ultimately self-defeating, as tariffs are largely borne by US businesses and consumers.
• Shifting Global Alliances: The discussion highlighted a potential shift in global alliances, with countries like Canada seeking closer economic ties with China as an alternative to relying solely on the US.

Notable Quotes

• Hurle Fang (Chinese Vice Premier): “We should firmly support free trade and jointly promote a universally beneficial and inclusive economic globalization.”
• Victor Gao: “China has become the real standard bearer of free trade…defending free trade is not only defending its own legitimate interest, it is actually defending the legitimate interest of mankind.”
• Olrich Brookner: “This is not an enemy, but the European Union…is now lectured…that we do not share the same values as the current administration in the White House.”
• Anthony Chan: “The economics profession has been averse to these kinds of actions [tariffs] because for hundreds of years we've believed in the theory of comparative advantage.”
• Ursula Vanderlayen (European Commission President): “This agreement sends a very strong message to the world. It reflects a clear and deliberate choice. We choose fair trade over tariffs.”

Conclusion

The World Economic Forum in Davos served as a platform for China to reaffirm its commitment to multilateralism and free trade amidst growing global economic tensions. The panel discussion revealed a complex landscape of shifting alliances, escalating trade disputes, and diverging perspectives on the best path forward for the global economy. While the US continues to pursue a more protectionist and unilateral approach, China and Europe are advocating for greater cooperation and a return to a rules-based international order. The long-term implications of these diverging strategies remain uncertain, but the discussions in Davos underscored the urgent need for dialogue and collaboration to address the challenges facing the global economy.