Decouple and catastrophe awaits

Captive audience

In the US, some in the middle class feel their incomes have stagnated, while incomes have been rising in developing countries. This perception has prompted these people to question the multilateral economy or a more globalized economy.

"It's easy on the prima facia evidence to find a captive audience in a middle class whose living standard has been stagnating. But on the other hand, you should understand the wealth of the developed countries, including the US, has been increasing in absolute terms," Jin told the Aspen Security Forum.

Rather than globalization being at fault, it is the lack of domestic policy adjustment and inadequate income redistribution that is responsible for the subsequent social problems, according to Jin.

"Not surprisingly, decoupling will erode the economic efficiency and make the matter worse," he said.

It's easier to see improvements in people's living standards in China than is the case with people in the US and other developed countries. "But it's wrong to believe that this is a zero-sum game: You are going up, we are going down," he said.

Low-income economies seem to be better off－and more conspicuously so－thanks to global trade and investment. That does not mean the higher-income partners do not stand to gain in this process, Jin said.

These higher-income economies usually get a disproportionately bigger market share from the lower-income economies, due to the greater demand for their high-end products as the incomes of people in low-income countries go up, he said.

Cheaper consumer goods from China have for decades sustained the high living standards of people in the US, and China can afford to import more high-end products from the US－from aircraft to beef－thanks to international trade.

On the other hand, the increased competitiveness of China and other Asian economies in many export goods belies the staying power of the competitive edge that the advanced economies enjoy in critical sectors.

Jin said the AIIB has been doing business with major financial institutions in the US and Europe, and has invited US businesses to participate in bidding for contracts.

"So what we've been aiming at is to bring countries together, bring people together and bring the companies together to see that we all have the benefits from this," he said.

"If there's decoupling, if people don't talk to each other, if there's a real severance, I think all the benefits accruing to the United States, to China, and to many other countries would be wiped out all together."