Opinion

What are China’s global economic intentions?

At this January's Davos meeting, Chinese President Xi Jinping announced to a surprised audience that China would be the world’s new champion of globalisation. Bruegel scholar Marek Dabrowski agrees that a functioning global trade system is in China's interest.

By: Date: April 25, 2017 Topic: Global Economics & Governance

This comment was originally published in the Winter 2017 edition of International Economy.

TIE Logo

The speech of President Xi Jinping in Davos should not surprise anybody. For the last thirty years, the Chinese economy has benefited enormously from free trade and financial globalisation. During this period, it moved up from the group of low-income countries to the upper middle-income group and eradicated most of its extreme poverty. According to the IMF World Economic Outlook database, when Chinese market reforms started in 1980, country’s GDP per capita in purchasing power parity terms was equal to only 2.5 percent of that of the United States. In 2015, it reached the level of 25.6 percent of U.S. GDP per capita in PPP terms. In 2014, China became the largest world economy as estimated in PPP terms.

As an upper-middle-income country, China is even more dependent on the uninterrupted functioning of global markets than it was thirty, twenty, or even ten years ago. A substantial part of the Chinese manufacturing industry has become part of global value chains. Moving up within these chains, Chinese enterprises are interested in increasing imports of new technologies. Foreign direct investment plays an important role in the modernisation of the Chinese economy. There is also the expansion of Chinese outward investment going beyond traditional resource related projects in developing countries. The largest Chinese corporations need access to the world financial markets to continue their expansion.

In the coming decade, China will have to change its growth model, largely due to a forthcoming demographic crisis (a legacy of the one-child policy) and increasing environmental and infrastructure constraints. Again, meeting this challenge will require deepening its access to the global and regional markets for goods and services, capital, and, at some point, labour. China will need even more modern technologies, highly trained specialists, and deeper scientific cooperation with leading research centres of the world.

For all these reasons, it is in the vital interest of China to defend global economic openness and liberal trade regimes against danger from a protectionist backlash. However, in order to become a credible and respected champion of globalisation, China must do a lot of its own homework. This includes continuation of its market-oriented economic and institutional reforms, increasing domestic economic, civic, and political freedoms, and building a modern legal system based on the rule of law.

China should restructure and open up its financial sector and liberalise capital account transactions, as well as open other service sectors, remove remaining barriers to foreign capital, and fully enforce intellectual property rights. Changing its monetary policy regime towards inflation targeting and a freely floating exchange rate would be the best counter-argument against continuous accusations of currency manipulation. Finally, China should contribute more to global and regional security, resolve territorial disputes with its neighbours, and refrain from actions which antagonise them.


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint.

Due to copyright agreements we ask that you kindly email request to republish opinions that have appeared in print to communication@bruegel.org.

View comments
Read article More on this topic More by this author

Blog Post

Global income inequality is declining – largely thanks to China and India

Income inequality among citizens of 146 continues to fall, though at a somewhat reduced pace, according to the updated Bruegel dataset. Income convergence of China and India accounts for the bulk of the decline in global income inequality from 1988-2015.

By: Zsolt Darvas Topic: Global Economics & Governance Date: April 19, 2018
Read about event More on this topic

Past Event

Past Event

The current state and future of the world trading system

This event will discuss the current state of the multilateral trading system and how it might evolve in the future.

Speakers: Iana Dreyer, Marc Vanheukelen, Everton Vargas, André Sapir and Xia Xiang Topic: Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 19, 2018
Read about event More on this topic

Upcoming Event

Apr
25
07:45

What European trade policy in face of an emerging global trade war

On 25 April Bruegel is pleased to host Bernd Lange, Chair of the European Parliament's committee on International Trade.

Speakers: André Sapir, Bernd Lange and Guntram B. Wolff Topic: Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article More by this author

Podcast

Podcast

Director's Cut: EU risks US tariff pain in standing by the WTO

As global trade war continues to unfold, Bruegel director Guntram Wolff is joined for this Director's Cut of 'The Sound of Economics' podcast by Bernd Lange MEP, chair of the Committee on International Trade (INTA), to discuss Europe's options.

By: The Sound of Economics Topic: European Macroeconomics & Governance, Global Economics & Governance Date: April 18, 2018
Read article More on this topic

Blog Post

Free trade in Africa: An important goal but not easy to achieve

The signing of the African Continental Free Trade Agreement and the Kigali Declaration may signal a new push towards economic integration on the African continent. However, it remains to be seen how many more countries sign up, how successfully 'phase two' is implemented later this year, and whether the agreement can be built upon to more comprehensively promote trade in services and a reduction of non-tariff barriers.

By: Marek Dabrowski and Yana Myachenkova Topic: Global Economics & Governance Date: April 13, 2018
Read article More on this topic

Blog Post

The European Globalisation Adjustment Fund: Time for a reset

It is only in the last decade that the EU has had an active policy to reintegrate workers who lost their jobs as a result of globalisation, through the European Globalisation Adjustment Fund (EGF). In this blog, the authors assess the performance of the Fund and make three recommendations to improve its effectiveness. To be more successful, the Fund should improve its monitoring and widen the scope of its usage.

By: Grégory Claeys and André Sapir Topic: European Macroeconomics & Governance Date: April 11, 2018
Read article More on this topic More by this author

Opinion

US Tariffs Aim to Contain China’s Technological Rise

While tension increases with each of the imports listed under the new tariffs, it now seems clear that the US are trying to slow down China's technological advances. Though such a protectionist attitude represents an obstacle, China should consider it an opportunity to strengthen relations with its Asian neighbours and the EU.

By: Alicia García-Herrero Topic: Global Economics & Governance Date: April 10, 2018
Read article More on this topic More by this author

Opinion

What Are the Targets in the US–China Trade War?

Following the US announcement of new, high tariffs on imports, China is answering the Trump administration by applying its own series of tariffs. In this article, the author identifies the list of products that each country will be targeting, going beyond purely trade issues as each attempts to weaken the other.

By: Alicia García-Herrero Topic: Global Economics & Governance Date: April 10, 2018
Read about event More on this topic

Upcoming Event

May
25
08:30

Where is China’s financial system heading? Implications for Europe

An event on the Chinese Banking Sector.

Speakers: Alicia García-Herrero and Guntram B. Wolff Topic: Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article More by this author

Opinion

How Should the EU Position Itself in a Global Trade War?

It is high time for the EU to work on more than just wishful thinking in response to the US challenge to global trade. With the first cracks appearing in the multilateral system, it will be difficult for the EU to maintain a middle course between the US and China.

By: Guntram B. Wolff Topic: European Macroeconomics & Governance, Global Economics & Governance Date: April 5, 2018
Read article More on this topic More by this author

Podcast

Podcast

Director’s Cut: A global trade triumvirate?

In this week’s Director’s Cut of ‘The Sound of Economics’ podcast, Bruegel director Guntram Wolff hosts a discussion with Bruegel fellows Alicia García-Herrero and André Sapir on where Europe will position itself between the two major trading powers of China and the United States if relations continue to cool.

By: The Sound of Economics Topic: Global Economics & Governance Date: March 27, 2018
Read article More on this topic

External Publication

Europe in a new world order

The EU is a relatively open economy and has benefited from the multilateral system. We argue that the EU should defend its strategic interests. The Singapore ruling has offered a useful clarification on trade policy. Addressing internal imbalances would also increase external credibility. Finally, strengthening Europe's social model would provide a counter-model to protectionist temptations.

By: Maria Demertzis, Guntram B. Wolff and André Sapir Topic: European Macroeconomics & Governance Date: March 26, 2018
Load more posts