China’s future for ki and jobs five big questions from davos | davos 2023
Several major issues emerged from the World Economic Forum in the Swiss resort of Davos. Here are five of the most pressing issues that dominated this year's meeting of the global elite.
Will China be forced to make friends with the West?
Donald Trump's trade war with China – continued by his successor Joe Biden – has left relations between East and West at rock bottom. But as covid and trade tensions halved Chinese growth to just 3% last year and Western companies like Apple moved business out of the world's second-largest economy, Beijing has hinted it may take a less hostile approach.
Vice Premier Liu He appeared on the main stage at Davos to reassure foreign investors that it was open for business after three years of disruption by Covid. "We need to abandon the Cold War mentality," he said. "We need to open up further and make it work better."
Whether the West is ready to believe this remains to be seen. Executives from several technology companies said they were approached at the summit by U.S. intelligence officials who were keen to understand their operations in China. "They want to know which side you're on," says one tech chief.
FBI Director Christopher Wray gave a speech arguing that China's artificial intelligence program would be weaponized by the country, telling attendees, "The Chinese government has a larger hacking program than any other nation in the world."
Several economists also predict that China's rapid reopening could reignite rapid inflation by boosting demand for commodities, just as central bankers hoped they had done to control rising prices.
Will help or hinder Biden's $369 billion green subsidy program?
U.S. and EU nations arrived at Davos with a $369 billion dispute simmering in the background: Joe Biden's huge green subsidy program known as the Inflation Reduction Act (IRA). It provides substantial government subsidies to companies that invest in green technologies critical to the transition away from fossil fuels, including electric cars, batteries, and renewable energy technologies such as solar panels and wind turbines.
Jozef SIkela, Minister of Industry and Trade of the Czech Republic, equated it to "doping in sports" and said it would attract companies from Europe to the U.S. But Fatih Birol, executive director of the International Energy Agency, said the IRA is the "most important climate action after the 2015 Paris Agreement".
Some have speculated that this could lead to a trade war between the U.S. and the EU, similar to the decades-long subsidy dispute between Boeing and Airbus. The EU responds with its own Net-Zero Industry Act, which will simplify and speed up clean-tech production sites.
Christine Lagarde, president of the European Central Bank, said she hopes the subsidy race "will not be a race to the bottom". While British Labour Party leader Sir Keir Starmer welcomed the idea of a more activist state, British Business Secretary Grant Shapps was much cooler on the idea, calling it "dangerous".
Threat of a new debt crisis?
About a quarter of the world's countries are in or close to a debt crisis. In Davos, all multilateral organizations that keep an eye on the financial weakness of poor countries – the UN, the International Monetary Fund and the World Bank – expressed their concern.
Achim Steiner, administrator of the U.N. Development Program, said there is an urgent need for a comprehensive solution, but is not sure if the necessary bandwidth or leadership is available.
"Nothing is happening that corresponds to the problem," Steiner said. "There is a growing recognition that the institutions that were created to deal with this – the G20 and the Bretton Woods institutions – have been inactive for a year [the IMF and the World Bank]."
With slower global growth and rising interest rates, countries are struggling to pay their debts. Many also took out loans in U.S. dollars, which were revalued on the foreign exchange markets. Steiner said there is an urgent need for financial support through a new issue of IMF Special Drawing Rights – a form of money creation that increases a country's reserves – along with debt restructuring. This requires more flexibility from two key creditors: China and the private sector.
Can the Gulf countries modernize and abandon hydrocarbons?
The corporate logos that adorn store fronts on the Davos Promenade are a good barometer of changing economic trends. After Russia was blacklisted following its invasion of Ukraine and China kept a low profile, Gulf states – loaded with petrodollars – took over Swiss ski resort en masse.
The long road winding its way to the conference center was dominated by Middle Eastern brands, from UAE logistics company DP World to Neom, the $500 billion mega-city that is the cornerstone of Crown Prince Mohammed bin Salman's plan to modernize Saudi Arabia.
Gulf countries need to prove to the world that they can modernize as companies and businesses turn away from oil and gas. The Saudis used the World Economic Forum to promote the kingdom's modernization plan called Vision 2030 and the increasing role of women in the economy, while hoping the West would ignore atrocities such as the murder of Washington Post journalist Jamal Khashoggi, whose death in October 2018 was associated with Crown Prince Mohammed.
Jane Fraser, head of U.S. banking giant Citi, and Kristalina Georgieva, managing director of the International Monetary Fund, joined several senior Saudi ministers to discuss the entry of more women into the labor market and economic change.
"If you show up in Saudi Arabia and look at the opportunities from a business perspective … it's pretty breathtaking," Fraser said. 'As a banker, you get terribly upset'."