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Repositioning the Chinese economy on the global economic stage

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Abstract

A tectonic shift in the global economic prowess became obvious around the turn of the last century. Three decades of macroeconomic reforms, sustained growth and global integration have turned China into a future economic power of global magnitude, with unmatched breadth of resources and a robust manufacturing sector. Significance of the Chinese economy has radically increased and it has traversed from the periphery of the global economy to the core. For all appearances, this progress is likely to continue in the foreseeable future. China has grown to be the fourth largest economy in the world in a short time span and the third largest trader. Events like dawning of an economic superpower occur once in several generations. China is endeavoring to make a new niche for itself in the global economy as well as formulate a new role.

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Notes

  1. Emerging-market economy is a term coined by Antoine W. van Agtmael of the International Finance Corporation in 1981. It is a sub-set of developing economies. See Das (2004), Chap. 1 and 2 for an explanation of what emerging-market economies (EMEs) are and how are they defined.

  2. See Das (2005) for a detailed exposition on this issue.

  3. The supply–demand fundamentals for crude oil were in clear deficit. Towards the end of September 2007, average petroleum spot price (APSP) of benchmark West Texas Intermediate (WTI) shot up to $83.90 per barrel and in early November it topped $99. This was 65% increase in petroleum prices in 1 year. On 2 January 2008 they hit $100 a barrel, and a psychological barrier fell. In June 2008, prices had touched $140 per barrel. The global consumption of oil has been growing at an average annual rate of 1.9%; however, the production growth rate is 1.5% per annum. The last year, 2007 was the sixth consecutive year of oil price increases.

  4. Although there is a disagreement on dates, Professor T.S. Ashton, an authority on industrial revolution and the author of The Industrial Revolution 1760–1830, regarded it as starting in 1760.

  5. The four newly-industrialized Asian economies (NIAEs) are: Hong Kong SAR, Republic of Korea, Singapore and Taiwan.

  6. The acronym ASEAN stands for the Association of South East Asian Nations, which has ten members. The ASEAN-4 economies are: Indonesia, Malaysia, the Philippines and Thailand.

  7. The ten Asian high-performing (AHP) economies that turned Asia into the most rapidly growing region of the recent past comprised China, Hong Kong SAR, Indonesia, Japan, Republic of Korea, Malaysia, the Philippines, Singapore, Taiwan, and Thailand. This dynamic group of Asian economies was led by Japan. China is the latest entrant to this group of dynamic economies.

  8. See World Economic Outlook (2007), Chap. 1.

  9. In a BBC interview on 1 October 2007, Alan Greenspan notes, “The most credible worst case scenario is a recession in the US, driven by further fall in US house prices as people feel less wealthy and spend less money”. Even in the best case, “a substantial slowdown in the US, with repercussions across the globe” cannot be ruled out. Available on BBC News on the Internet at http://news.bbc.co.uk/go/prfr/-/2/hi/business/7022117.stn.

  10. See IMF (2004, Chap. 2) for a detailed discussion.

  11. The two-sector model of economic growth, developed by William Arthur Lewis (1915–1991), is a classical model of economic growth. Lewis believed that neoclassical economists did not describe the circumstances of the developing economies accurately because they assumed that labor is in short supply. Lewis’ model posited that a developing economy has two sectors, one modern and the other traditional. The modern sector is small and capital-intensive, while the traditional sector is large and non-capital intensive. A large amount of excess labor exists in the traditional sector; therefore, marginal product of labor is zero.

  12. The term “foreign-invested enterprises” stands for subsidiaries of TNCs and joint ventures. The assets of FIEs are owned in full or in part by foreign firms. This term is somewhat of a misnomer in China. It stands for local affiliates of foreign-owned firms. Many of these local affiliates are joint ventures with Chinese enterprises. Until 1992, almost all FDI in China was in the form of joint ventures. The expression “foreign-invested” was used to reassure that these ventures were domestic firms with foreign participation. Since 1992, a growing proportion of local affiliates of foreign firms are majority-owned or wholly-owned by foreign investors, but the use of the term “foreign-invested” continues to be applied to them. Presently FIEs consist of wholly-owned FIEs and joint-ventures like Sino-Foreign Contractual joint ventures and Sino-Foreign Equity Joint ventures.

  13. See UNCTAD (2007), Chap. 3, Table III.1.

  14. At the end of August 2007.

  15. See UNCTAD (2005, 2007).

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  1. Department of Economics, School of Business, Conestoga College, Suite 304, 435 Wilson Avenue, Kitchener, ON, N2C 2R9, Canada

    Dilip K. Das

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Correspondence to Dilip K. Das.

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Das, D.K. Repositioning the Chinese economy on the global economic stage. Int Rev Econ 55, 401–417 (2008). https://doi.org/10.1007/s12232-008-0047-4

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