17.2 China's role in globalization and international trade
3 min read•july 11, 2024
China's since 1978 transformed it into a global powerhouse. Opening up to foreign investment, joining the WTO, and becoming the world's reshaped international trade patterns and supply chains.
China's rise impacts global governance and challenges existing economic structures. While offering opportunities for foreign businesses, and intellectual property concerns persist. China's growing influence in international institutions reflects its economic clout.
China's Integration into the Global Economy
China's global economic integration
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- Economic reforms and initiated in 1978
- Shifted from centrally planned economy to market-oriented economy allowing for greater private enterprise and foreign investment
- Gradually liberalized trade and investment policies to encourage exports and attract foreign capital ()
- Accession to the (WTO) in 2001
- Committed to further opening its markets and adhering to international trade rules set by the WTO
- Increased access to global markets for Chinese goods and services by reducing tariffs and trade barriers
- Rapid growth in international trade propelled China's economic rise
- Became the world's largest exporter in 2009 surpassing Germany and the US
- Surpassed the as the world's largest trading nation in 2013 in terms of total trade volume
- Significantly impacted global trade patterns
- Increased competition in labor-intensive manufacturing sectors like textiles and electronics
- Shifted production networks and supply chains to China as multinational corporations sought lower costs
- Contributed to the decline of manufacturing in developed countries as jobs moved to China
China's major trade partnerships
- United States is China's largest trading partner
- China has a significant with the US leading to tensions
- Disputes over trade practices, intellectual property rights, and accusations of currency manipulation strain the relationship
- is China's second-largest trading partner
- Growing trade and investment ties between China and the EU
- Concerns over market access, Chinese government subsidies, and human rights issues complicate the partnership
- Other major partners in Asia
- Japan, South Korea, and ASEAN (Association of Southeast Asian Nations) countries have increasing trade and investment flows with China
- China's aimed at strengthening regional connectivity through infrastructure projects (ports, railways, highways)
China's Economic Power and Global Governance
China's influence on economic governance
- Increased representation in international financial institutions gives China more clout
- Gained larger voting shares in the (IMF) and recognizing its economic size
- Established the (AIIB) and the (NDB) as alternatives to Western-led institutions
- Seeks to influence the global economic agenda
- Advocates for a more multipolar world order not dominated by the US
- Promotes and alternative development models emphasizing state involvement
- Challenges the existing international economic order
- Concerns over China's and its compatibility with market-based systems
- Debates over the role of the state in the economy and the need for a level playing field between state-owned and private firms
Foreign business in China
- Market access remains a challenge
- Restrictions on foreign ownership in certain sectors like finance and telecommunications
- Complex regulatory environment and bureaucratic hurdles make doing business difficult
- is a major concern
- Inadequate enforcement of intellectual property rights leads to widespread counterfeiting
- Some foreign firms forced to transfer technology as a condition for market access
- Local competition from Chinese firms is intensifying
- Rise of in various industries from tech to auto manufacturing
- Government support and preferential treatment for local companies disadvantage foreign rivals
- Significant opportunities still exist
- Large and growing with a
- Increasing purchasing power of Chinese consumers attracts foreign brands
- Potential for collaboration and partnerships with Chinese firms to access the market
Key Terms to Review (21)
Asian Infrastructure Investment Bank: The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank established in 2016 to provide financial support for infrastructure projects across Asia and beyond. The AIIB aims to enhance regional connectivity, promote sustainable development, and stimulate economic growth by funding projects in transportation, energy, and urban development. Its establishment reflects China's increasing influence in global finance and its role as a leader in international development initiatives.
Belt and Road Initiative: The Belt and Road Initiative (BRI) is a global development strategy adopted by China in 2013, aimed at enhancing regional connectivity and economic integration through infrastructure development and investments across Asia, Europe, and Africa. It connects countries through a network of trade routes, promoting economic cooperation and fostering partnerships while extending China's influence on a global scale.
Consumer market: A consumer market refers to the marketplace where goods and services are sold directly to individuals for personal use. This market is crucial in understanding the dynamics of demand, purchasing behavior, and consumption patterns, especially in the context of China's rapid economic growth and its integration into global trade networks.
Domestic chinese firms: Domestic Chinese firms refer to businesses that are headquartered and primarily operate within China, often focusing on the domestic market while also increasingly engaging in international trade. These firms play a crucial role in China's economic landscape, contributing to both globalization and international trade as they expand their operations and influence beyond Chinese borders.
Economic reforms: Economic reforms refer to a series of policy changes aimed at improving the efficiency and performance of an economy, often through mechanisms like privatization, deregulation, and the introduction of market-oriented policies. These reforms can significantly impact a nation's development trajectory and its integration into the global economy, influencing everything from domestic productivity to international trade relations.
European Union: The European Union (EU) is a political and economic union of 27 European countries that have chosen to work together for common goals, including promoting peace, stability, and prosperity. By facilitating the free movement of goods, services, people, and capital among member states, the EU plays a significant role in shaping international trade dynamics, including China's interactions in the global marketplace.
Intellectual property protection: Intellectual property protection refers to the legal frameworks and policies that safeguard the rights of creators and inventors over their creations and inventions. This includes patents, copyrights, trademarks, and trade secrets, which provide exclusive rights to use, reproduce, or distribute original works and inventions. Strong intellectual property protection is essential in promoting innovation and creativity, especially in a rapidly globalizing economy.
International Monetary Fund: The International Monetary Fund (IMF) is an international organization that aims to promote global economic stability and growth by providing financial support and advice to its member countries. It plays a critical role in facilitating international trade, ensuring monetary cooperation, and reducing poverty through various programs that assist countries in need, especially during financial crises. The IMF's activities are particularly relevant to China's integration into the global economy and its engagement in international trade practices.
Largest exporter: The term 'largest exporter' refers to a country that sells more goods and services to other countries than any other nation in the world. In the context of globalization and international trade, being the largest exporter is crucial because it highlights a country's dominance in global supply chains, its economic influence, and its ability to shape trade policies and practices worldwide.
Market Access: Market access refers to the ability of a country or company to sell goods and services in a foreign market without facing significant barriers. This concept is crucial in understanding international trade as it influences a country's economic growth, competitiveness, and integration into the global economy, particularly as countries like China play a pivotal role in globalization and international trade by navigating various trade agreements and regulations.
New Development Bank: The New Development Bank (NDB) is a multilateral development bank established by the BRICS nations (Brazil, Russia, India, China, and South Africa) in 2014 to support public or private projects through loans, guarantees, equity participation, and other financial instruments. The NDB aims to foster greater financial cooperation among emerging economies and has become a significant player in international development financing, enhancing China's role in globalization and international trade.
Opening-up policy: The opening-up policy refers to China's shift towards economic reform and opening its markets to foreign investment and trade, initiated in 1978 under Deng Xiaoping. This policy marked a significant departure from the previous era of strict state control over the economy, embracing elements of capitalism while maintaining the Communist Party's political dominance. It aimed to modernize China's economy, integrate it into the global market, and improve living standards.
Rising middle class: The rising middle class refers to a socioeconomic group that is growing in number and influence, characterized by increased income, education, and access to consumer goods. This group plays a crucial role in shaping economies and cultures, particularly in China, as it becomes a significant driver of domestic consumption and global markets.
South-south cooperation: South-south cooperation refers to the collaborative efforts among countries in the Global South to share resources, knowledge, and expertise for mutual benefit. This concept promotes partnerships and exchanges in various areas such as trade, technology, and sustainable development, aiming to enhance economic growth and social progress among developing nations. By leveraging their shared experiences and challenges, countries involved in south-south cooperation can create more equitable and sustainable pathways towards development.
Special Economic Zones: Special Economic Zones (SEZs) are designated areas within a country where economic regulations differ from the rest of the country, aimed at attracting foreign investment and boosting local economies. They often offer tax incentives, less stringent regulations, and improved infrastructure, making them attractive for both domestic and foreign businesses looking to operate in a more flexible environment.
State-led economic model: A state-led economic model is an approach where the government plays a central role in directing economic activity and promoting growth, often through policies, investments, and regulations. This model emphasizes the importance of state intervention in strategic sectors, fostering both domestic and international trade. In the context of globalization, this model has enabled countries like China to leverage their economic planning for competitive advantages in global markets.
Trade surplus: A trade surplus occurs when a country's exports exceed its imports over a certain period, resulting in a positive balance of trade. This situation often indicates a country's strong economic position and competitiveness in international markets, as it is selling more goods and services abroad than it is purchasing from other nations.
United States: The United States is a federal republic consisting of 50 states and a significant global influence, especially during the 19th and 20th centuries. Its relationship with China has evolved through various historical phases, characterized by interactions ranging from trade to military intervention, shaping both nations' trajectories.
World Bank: The World Bank is an international financial institution that provides loans and grants to the governments of low and middle-income countries for the purpose of pursuing capital projects. It aims to reduce poverty and support development by fostering economic growth, improving infrastructure, and promoting education and healthcare systems. The World Bank plays a significant role in globalization and international trade by facilitating financial resources and expertise for developing nations, enabling them to engage more effectively in the global economy.
World Trade Organization: The World Trade Organization (WTO) is an international organization that regulates and facilitates trade between nations, aiming to ensure smooth and predictable trade flows. Established in 1995, the WTO provides a framework for negotiating trade agreements, settling trade disputes, and monitoring national trade policies, which has had significant implications for countries like China in terms of economic integration, political dynamics, and global influence.
WTO Accession: WTO accession refers to the process by which a country becomes a member of the World Trade Organization, agreeing to abide by its rules and regulations. For China, this was a significant step in its economic reforms, aligning its market practices with global standards and enabling its integration into the world economy. This move not only reinforced China's commitment to modernization but also positioned it as a major player in international trade and globalization.