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Globalisation winners like China
Wednesday, 10 September 2008 20:13


China - Always a Dragon

Napoleon Bonaparte once said that “when China awakes, it will shake the world”.  Little did the Corsican emperor know that China was just coming to the end of perhaps the most glorious 150 years of its history.  China was then to suffer through internal rebellions, foreign invasions and civil war for much of the 19th century and first half of the 20th century.  If there is one thing that currently motivates the Chinese people, it is to return to a position of international greatness and to become an equal partner of the United States.

So, while many people are worried about the rise of China, what we are experiencing is the return of China, the renaissance of China.  China has always been a dragon.  Already 2,000 years ago, China’s population of 60 million people was more double that of Western Europe.  And still today, China’s population is almost double that of Western Europe and its North American and Australasian offshoots.

GDP per capita in China was higher than that of Europe for the period from the fifth to the fourteenth century, thanks to its early technological advances, meritocratic bureaucracy and river basins which were agriculturally very rich and navigable.  While Europe’s per capita income forged ahead after the fourteenth century, Chinese population grew faster such that it was not until the mid-19th century that the total GDP of Western Europe and its Western offshoots overtook that of China.

China had lots of ups and downs from dynasty to dynasty, suffering invasions and being ruled by the Mongols under the Yuan dynasty and the Manchus in the Qing dynasty.  One lesson of this is that China is a very large country, difficult to govern from the centre and vulnerable at its borders.  But globalisation has always been always important – silk road, and Grand Canal.

The collapse then stabilization of China’s economy

China’s economy collapsed between the 1840s and 1940s.  As the West was opening to the rest of the world, and colonising, China was closing.  Per capita GDP in 1950 was less than three-quarters the 1820 level.  In 1950, China’s total GDP was less than a twelfth of that in Wester Europe and the Western Offshoots.

Although everyone is now quick to criticise Mao, he did restabilise the country – despite the “Great Leap Forward” to the “Cultural Revolution”.  He restored the territorial integrity of China.  Mao’s regime was able to impose internal order, and mobilise domestic resources for defence and development.  From 1952 to 1978, per capita GDP rose by 80 per cent, while total GDP rose threefold – notwithstanding the massive inefficiencies of state ownership and central planning, and virtual closure to the world economy.  This was helped by massive advances in education and health.

1978 – the start of opening in China

Why – a response to the failure of the cultural revolution under Mao, a response to the success of other Asian economies. Governments sometimes do the right thing when they have tested every other possible course of action.  Recognition that the CCP had to change course to remain in power.  People were already taking initiatives in private enterprise which was tolerated by the government.  Brilliance of Deng Xiaping.

But step by step. 1978 – liberalisation of agriculture – improved productivity.  Special economic zones created as free trade and investment areas.  Freedom for in small scale industry.  Progressive liberalisation of trade and investment.  Liberalisation of prices.  Joining WTO in December 2001

What is driving China’s globalisation ?

China has been incorporated into global supply chains -- the international segmentation of production processes among Asian economie, but has not yet created an autonomous engine for regional trade, which still depends on outside markets for final goods exports.  Production sharing between China and its neighbours has led to a reorganisation of industrial production in Asia and has propelled China to the top of the world exporters.

Assembly and processing of imported inputs for re-export account for about half of China’s foreign trade.  These activities have been the most dynamic part of China’s exports since the early 1990s and have allowed for their rapid diversification from textiles to electronics.  Assembly and re-processing is responsible for China’s entire trade surplus with the US and Europe.

Foreign firm affiliates account for more than half of China’s total trade and they carry out  the overwhelming sharing of processing trade.  This reflects the outsourcing strategy of firms which have transferred to the mainland the labour intensive stages of production processes.

The share of Asia in world trade has not changed very much over the last 15 years.  What has occurred is a decline in the importance of Japan, more or less compensated by a rise in China.  China’s economy is more open to trade and investment than Japan has ever been.

Renaissance of the dragon

With annual economic growth of close to 10% for almost thirty years, and some 20% of the world’s population, China has quickly become a new big kid on the block.  Lifted 300 million people out of poverty over the last 3 decades.

Foreign trade grown at 15%.  In 20 century, only Japan and Korea have achieved similar progress.  

National income has been doubling every 8 years and this has been reflected in the reduction of the poverty rate to much lower levels.

World’s fourth biggest economy, leading trade and investment nation.  Taiwan is the single largest investor in China and the principal source of China’s technological revolution.

Life expectancy – 71.4 in 2000 (69.6 for men, 73.3 for women) – above average for lower middle income countries.

Increase in US students in Asia, particularly China.

How did C grow – US open markets.

But how is the US growing – students and migrants from China, India and elsewhere.

110 million web uswers, 2nd to US But Internet police cannot keep up. 

China’s effects on the rest of the world

Exporter of labour intensive products, importer of higher tech products, importer of raw materials.         China’s economic growth been driving the world economy.

China is now seeking oil and other resources in Africa, Latin America, Australia and elsewhere.  In doing so, it is befriending many corrupt regimes, selling arms to rogue states, and sheltering them from international pressures.  But, is it worse than ODA in the cold war ?  China supports rogue states like Sudan, Angola, Zimbabwe, Burma, Iran for access to raw materials.

China’s political relations with the rest of the world

Soft power and cultural diplomacy

Becoming a military power as well as economic power.  Russia was a military power, but not an weconomic power – Japan is an economic power, but not a military power.

Assisting developing countries, investing developing countries, holding exhibitions everywhere in the world.

China’s problems’

1- Income distribution – rich getting very rich, but the poor are making little progress.
2- Ageing society – old before rich
3- State-owned enterprises and banks are often very inefficient
4- Environment problems
5- Corruption
6- Transition to democracy – will be a challenge to manage – current system could be called Pluralistic Communism
7- Very decentralised state.  Beijing does not have full control over the provinces -- “heaven is high, and the emperor is far away”

But the Chinese are aware of these problems and are making efforts – including in the areas of education and innovation.

Our problems with China

1- Market openness
2- Respect for IPR
3- Democracy and respect for human rights

Olympic Games (Beijing 2008) and World Exhibition (Shanghai 2010)

Hosting global events – good for projecting national image on world stage.

But risks – environment, risk of protests, bad press

China and world culture

China has always made a major contribution to world culture – silk, porcelain, cuisine.

But also a major contribution to global contemporary culture – fusion or hybrid culture – with France often being the centre for this.

Painters – Zao Wou-ki, Chuh Te-Chun

Literature – Gao (Nobel Prize) and Shan Sa

Contemporary classical music – Tan Dun and Chen Qigang

Cinema

Pop music – Coco Lee, Na Ying, Fei Wang


 


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