Actions Speak Louder than Words

by | February 9, 2021

Last month, President Xi delivered a speech to the virtual Davos conference, which sparked a flurry of articles and blogs amongst the commentariat. Perhaps more important was a short statement from President Biden which should have attracted attention. At root is the continuing risk of economic nationalism, across both sides of the Pacific.

In recent years, the Chinese President has used a series of speeches to claim the moral high ground in global politics. We should listen carefully to his statements. After all, the Chinese economy is coping with the pandemic better than most, is set to grow by 10% in the years 2020 & 2021 combined, and may be larger than the US economy by the end of this decade.

Xi’s latest speech to the attendees at Davos deserves to be read in full. The title sets down a marker: ‘Let the Torch of Multilateralism Light up Humanity’s Way Forward’. There is much in the speech which could have been written by President Biden, or indeed Kristalina Georgieva from the IMF, President Macron or other G7 leaders. ‘Step up macroeconomic policy coordination and jointly promote strong, sustainable, balanced and inclusive growth of the world economy’. ‘Close the divide between developed and developing countries and jointly bring about growth and prosperity for all’. We must ‘come together against global challenges and jointly create a better future for humanity’. 

Of course President Xi took the opportunity to fire a warning shot across the bow of newly elected President Biden. Countries should ‘abandon ideological prejudice and jointly follow a path of peaceful coexistence, mutual benefit and win-win cooperation’, alongside a warning that ‘to build small circles or start a new Cold War, to reject, threaten or intimidate others, to wilfully impose decoupling, supply disruption or sanctions, and to create isolation or estrangement will only push the world into division and even confrontation’.

Fine words indeed. However, actions speak louder than words. That adage works for CEOs and Human Resources departments, the mayor of your city, the Prime Minister of your country, and equally for the most powerful men in the world. 

Sadly, recent actions betray the high-minded rhetoric. How does Xi’s commitment to ‘international law and rules’ square with news of yet another border skirmish between China and India, or the recent deterioration in Sino-Australian diplomacy and trade relations? How do his pledges to support the WHO in the fight against the Covid-19 pandemic fit with the series of obstacles confronting WHO specialists wishing to visit Wuhan over the past year? And admonitions to avoid meddling in other countries’ internal affairs are an afront to those concerned about human freedoms in Hong Kong or the rights of the Uighurs. After all, China is signatory to a number of UN human rights treaties. One can be forgiven for thinking that China’s high-minded rhetoric harkens back to Sir Henry Wooton’s famous quote about an ambassador being “an honest gentleman sent to lie abroad for the good of his country.”

Sadly, the divergence between rhetoric and reality may even extend to climate change, where many in the Biden Administration, and in other countries, have placed great hope for progress and cooperation in the coming decade. Here, too, the rhetoric is promising, with Xi announcing an aim for China to achieve carbon neutrality by 2060, and striving to peak carbon dioxide emissions before 2030. Yet China continues to invest vast sums in fossil fuels. The Financial Times recently reported that China installed 120 gigawatts of wind and solar power in 2020—more than double the year before—but also approved more new coal power plants in the first half of 2020 than any year since 2015. We must wait for details of the next Five Year Plan, at the National People’s Congress in March, to assess whether there actually will be sufficient commitment. 

‘Watch what they do, not what they say’. And now the world watches with fascination as President Biden takes a series of executive steps following a campaign of promises.

For those economists who remain committed to the idea that free trade is mutually beneficial, Biden’s first steps are discouraging. He recently signed an executive order to promote the “Buy American” agenda on which he campaigned last year. The aim is to support US manufacturing through Federal procurement, directing agencies to strengthen requirements about purchasing products and services from US companies, and creating a position in the Office of Management and Budget responsible for enforcing the directive. Examples include the Federal government replacing its fleet of vehicles with American made electric cars and using domestic firms to replenish Federal stockpiles of PPE equipment. At the end of the day, the sums involved may not be large, but the principle and the direction are clear, and discouraging for a world that needs to restore faith in trade and more broadly in shared goals and ambitions.

At the heart of China’s 2021-25 Five Year Plan was the phrase ‘dual circulation’, namely a focus on domestic activity and consumer spending to replace the ‘international circulation’ model, with its emphasis on global exports that dominated China’s economic model for the first two decades of the 21st century. Rising populism across the world provides the fuel for other countries to follow suit, under the cover of ‘national champions’ or ‘regulatory standards’, and understandably motivated by domestic politics but with unfortunate implications for a shared destiny. 

There is so much that we can learn from a great country such as China, both good and ill. From the perspective of an increasingly worried international economist, the gap is expanding between encouraging rhetoric and concrete actions. If the pandemic has taught us anything, it is that we live in an interdependent world, where our livelihoods and indeed our lives depend on shared goals and actions that turn rhetoric into reality. 

Filed Under: Featured . Politics

About the Author

Andrew Milligan is an independent economist and investment consultant. He is a Board member of the Asia Scotland Institute, an adviser to the Health Foundation, to Balmoral Asset Management and to the Educational Institute of Scotland, and a Fellow of the Society of Professional Economists. From 2000-20, Andrew was the chief market strategist for the global fund manager Aberdeen Standard Investments.

After graduating from Bristol University, Andrew started in H.M. Treasury where he specialised in the IMF and World Bank’s handling of the Latin American debt crisis. He then worked in turn for Lloyds Bank, the broker Smith New Court, and New Japan Securities as an international economist. In 1995 he entered the asset management industry, becoming Head of Economic Research and Business Risk for Aviva Investors. In 2000 he moved to Edinburgh to work as the Head of Global Strategy for Standard Life Investments, in charge of a team covering economic and market research, tactical and strategic asset allocation decisions, client advice and communications for retail and institutional clients globally.

After its merger with Aberdeen Asset Management to form Aberdeen Standard Investments, the company became the second largest active fund manager in Europe with over 30 offices across the major financial centres. Andrew is well known as a public speaker while his writing, commentary and interviews have appeared in all the mainstream media.

Related Posts

Pin It on Pinterest

Share This