China's Roaring Economy
Inside the Modern Dragon
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The Embodiment of Globalization
If American dominance is synonymous with globalization in many parts of the world today, Chinese power might be the force that comes to mind when one thinks of globalization in the future. The twist is that China could significantly change the definition of globalization.
Today, the term connotes an interdependent world in which countries of various political categories rely on each other to buy and sell goods and services, provide capital for investments, and invest in their domestic economies. Though it is naïve to equate the term “globalization” with “Americanization,” it is easy to see how observers can identify one with the other. The United States is at the center of the phenomenon of global integration. Since the post-World War II era, the United States played the role of a facilitator, an instructor, and an enforcer of the global trading system as we know it today. U.S. aid that flowed to Western Europe following WWII helped that region recover from a devastating war and adopt a U.S.-led capitalist system as its own. U.S. leaders and their allies design the institutional framework (the IMF, the World Bank, and eventually the WTO) to facilitate and increase international trade and transactions. And U.S. military provided the overarching security structure that protected capitalist allies from communist encroachment.
All these factors resulted in an acceleration of the globalization and of extraordinary economic growth in Western Europe, the United States and East Asia. When the Cold War ended and the old East-West competition disintegrated, countries like India, China, and Vietnam were free to take part in the global trading system. Now as these countries and others emerge as economic powers, “globalization” has taken on new meaning.
Today, China is emblematic of globalization in the modern sense of the phrase. To many, that means low wages, loss of manufacturing jobs as well as low prices. Many disenfranchised workers and business owners would also say the modern meaning of “globalization” is unfair trading practices by China.
Fastest growing giant in history
China has industrialized faster than almost any country in history and is on its way to becoming an economic giant. For the West, that means fierce competition for capitalists who had achieved some sense of sustainable growth and security before China’s rise.
It’s ironic that China—a reluctant reformer led by a Communist party—is now a dominant player in the global capitalist system. But once profit became a driver of change in the Chinese economy, a dragon was let loose. Now, Chinese industrialists are able to produce more goods at lower costs than their foreign competitors.
Thanks in large part to government subsidies that keep costs of producing low—not to mention availability to low-wage workers, China has gained significant market shares in the manufacturing, textiles, consumer staples and industrial sectors. Producers are able to offer goods at bottom dollar thanks to the following government policies:
• Subsidies that provide low-cost electricity, coal, oil and water to producers.
• Restrictions against independent unions.
• Lax environmental laws.
• Incentives for banks to lend capital.
• Currency pegged to the dollar.
• And tax rebates for exporters.It is easy to underestimate the global impact of China’s rise. Its sheer size—in land mass and in population—means that China can’t help but to be an international heavyweight. Driven by a need to address the needs of a massive, mostly poor population, China is extending its influence beyond its borders to obtain for scarce resources in underdeveloped countries. As China invests in Africa and extracts the continent’s natural resources, it follows a code of conduct that differs greatly from Western ideals.
Some Western entrepreneurs would argue that as China asserts itself abroad, its domestic economy remains closed to foreign imports and/or does not protect the capitalist market with a regulatory system of checks and balances. As a result, its domestic market is reputed to be impenetrable to foreign imports.
Chinese competition is creating a backlash against free trade. According to Kishore Mahbubani’s essay in the May/June 2008 Foreign Affairs, the West has lost confidence in its ability to compete with emerging economies like China. That could mean an end to the U.S.-led trade liberalization and a beginning to a new wave of protectionism.The United States was the force that drove global integration forward in the 20th Century. China just might be the force that pushes it—global competition—to new limits.
