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Globalisation and Trade - Will China become the centre of the world economy?

Geoff Riley

7th July 2021

Will China continue to become the centre of the world economy? Or will the global economy fragment into a regionalised rather than a unified global system?

Globalisation and Trade; Will China become the centre of the world economy?

The FT's global China editor James Kynge and FT economics commentator Martin Sandbu discuss this question in this excellent FT video.

Since 1979 to the end of 2018, China's annual real GDP growth averaged 9.5%. The programme of market reforms began in the late 1970s which overhauled their command economy. Attracting FDI has been key and so too has been the unprecedented rural-urban migration that accelerated from the mid 1990s onwards.

China has also benefited from the pre-2008 shift towards global liberalised trade although this model of open trade and capital markets has of course come under renews threat in the last 10-12 years.

China remains a middle-income country despite being - on some measures - the largest economy in the world. Chinese average income remains less than a third of mean income in the USA.

But their emerging middle class is now a powerhouse for driving consumption and growth. Chinese consumers last year spent $7.3 trillion which is bigger than the entire size of the Japanese economy.

Can China overcome the middle-income trap?

Their growth model needs to tilt towards ideas and technological progress and away from input-driven and productivity-driven growth.

Emerging areas of comparative advantage in cutting-edge industries are highlighted in the discussion. But will the rest of the world allow a situation where the latest technologies are in part dependent on China?

There are strong reasons for expecting an intensification of trade relationships at a regional rather than a global level. There are three huge regional supply hubs based around South-east Asia, Europe and the United States. In the USA and Europe, the mood has been shifting away from integrating with China.

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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