Despite the flourishing debate over the rise of China and the puzzle of the evolution of BRICS, the extant literature has offered a relatively limited exploration of the extent to which the BRICS is important for China in the global economic governance context. This chapter therefore examines how China sought a greater voice in global economic governance and its incentives to reinforce the BRICS platform by examining the illustrative case of the frozen established institutions – the International Monetary Fund and the World Bank – and the intensifying institutionalization of the BRICS mechanism. It scrutinizes how China has encountered the ex ante distribution of power and the frozen power asymmetries and recognized the weak trajectory for future reform within both institutions. Next, it delineates that China and other BRICS countries have encountered similar discomfort and shared an understanding of the changing nature of authority in global governance; thus as a “team of the dissatisfied” the BRICS countries have been trying to prime their common interests and collective actions via the BRICS mechanism. The chapter argues that the BRICS plays a multifunctional role in serving China’s multi-pronged approach for better shaping global economic governance. It thus offers a more sophisticated understanding of China’s ongoing rise and BRICS evolution.
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This chapter discusses China and the structural transformation of the world economy. China has recorded an outstanding economic performance in the last 35 years and become the second-largest economy in the world, although its income per capita is still a fraction of that of industrial economies. There are different views of its prospects ahead, but most of them share the view that the world economy will remain unchanged. This is a false assumption. Indeed, an accelerated transformation is taking place. This chapter argues that the forces of change are globally favorable to China, although the country faces important challenges. The ultimate purpose of this chapter is to discuss whether China is or is not well prepared to face the twin challenges of domestic rebalancing and adapting to accelerating structural change in the world economy.
China rapidly became a global power, due to its opening-up and reform policy and its increasingly important status in the international system. The G20 and the Belt & Road Initiative are examples that show China’s mechanisms of participating in global governance. Such initiatives are compatible with China’s new principles for diplomacy and its emphasis on peaceful development. In the future, cooperation, rather than isolation may help make China great again as a global power.
The surge of Chinese outward direct investment has been one of the most important phenomena in the global investment arena since the early 2000s, especially after the outbreak of the global financial crisis. Driven by both proactive corporate strategy and strong government support, foreign direct investment outflows from China increased from less than US$3 billion in 2003 to nearly US$200 billion in 2016. In recent years, outflows have been driven by some critical emerging forces and demonstrated new structural characteristics. In particular, cross-border mergers and acquisitions have become an effective means to acquire “strategic assets,” such as famous brands and advanced technologies, in developed economies. This has helped Chinese companies move up the value chain and enhance their international competitiveness, and is also instrumental for the overall restructuring and upgrading of the Chinese economy. However, large-scale capital outflows have also generated risks and led to policy concerns. With the recent introduction of the Belt & Road Initiative, Chinese investment and financing in infrastructure industries and productive capacities in other developing countries will increase, helping enhance international connectivity, foster economic development, and inject a key impetus to globalization.
Globalization is cyclical, with government policies swinging like a pendulum between openness to market forces and social protection. Its negative impacts on living standards and job opportunities in industrialized countries have generated strong political backlash in recent years, exemplified by the rise of the anti-free trade and anti-immigration movements in North America and Europe. This is partly because policy makers in developed countries have failed to address increasing public fears toward the open economy after a major crisis, relying on the old logic legitimized by previous practice, and failed to tackle new problems in new environments. Nevertheless, there is still a chance China’s Belt & Road Initiative could counter the globalization reversal. The China–Europe freight train service has a special function of promoting exports of European medium-size and small companies to the Chinese market, which will not only help to reduce the imbalance in China–Europe trade, but, more importantly, assuage anti-free trade movements in Europe. The China–Pakistan Economic Corridor will serve two important supplementary functions in addition to promoting economic growth in Pakistan: it will aid in undermining terrorist activities by reducing poverty, and it will also reduce the outflows of immigrants to other countries by increasing job opportunities in their home countries, thus alleviating anti-immigrant sentiment globally.
In a short span of time, China has assembled many of the trappings of a global power. With every major foreign policy initiative, such as the Belt & Road Initiative and the establishment of the Asian Infrastructure Investment Bank, China seems to be moving closer to realizing its great power ambition. This chapter discusses the following questions: Will China replace the United States as the dominant power? What challenges does China face on its path to becoming a global power? What internal and external factors have contributed to changes and continuities in Chinese foreign policy? How does the international community view China’s rise? What are the challenges China faces in its pursuit of the “Chinese dream”? How can China and the international community work together to ensure China will be a peaceful, responsible, and respectable global power?
China began its rapid economic growth following the implementation of the Economic Reform and Opening Up policy of 1978. The Southern tour talks by former Chinese leader Deng Xiaoping in 1992 sped up the country’s economic development and made it more open. China was admitted as a member of the World Trade Organization in 2001 and has since become the world’s second-largest economic power. After its extraordinary economic performance depending on exports and cheap labor over the past 40 years, China must change its economic model to drive sustainable economic development. Innovation has become the keyword and the most crucial element for the economic model shift. China has clearly embarked upon innovation-driven growth. This chapter surveys China’s goal of becoming a nation of innovation by 2020, and analyzes China’s initiatives to promote innovation. China is pursuing more innovative activities and is innovating at a larger scale. The chapter discusses the grassroots innovation movement, including the startup boom and regional advanced cases, and emphasizes that China’s innovations are going global with more ventures going abroad. At the same time, it explores the challenges faced by China as it tries to position innovation as a national strategy.
In 2016, the global economy continued to revive slowly. Global outbound direct investment (ODI) declined within a narrow range. In the investment areas, ODI mainly turned to the developed regions of Asia, Europe, and America, particularly in the service industry sector. Investment trends centered on cross-border mergers and acquisitions, and greenfield investment growth was underpowered. Although international investment policies tended to be free and convenient, several developed countries intensified the supervision and restriction measures on outbound investment. However, Chinese companies were upstream in outbound investment, and created new historical records in 2016. Chinese companies preferred developed countries when choosing investment areas. Investors showed diversification development trends of “state-owned and privately owned enterprises advancing together.” Investment methods focused on mergers and acquisitions. Investment in the manufacturing industry grew strongly. The overall industrial chain layout, strategies based on local conditions, and the start of brand strategy were new features of the outward expanding companies. This chapter discusses eight significant challenges that Chinese companies faces in overseas development and proposes countermeasures and suggestions. It provides readers with a general view of global outbound investment and the development status and features of Chinese companies “going-out.”
Wu Xiangning and You Ji
The South China Sea dispute has been structured into a grand geostrategic rivalry between the major powers and as a result almost dominated China–US bilateral relations in recent years, apart from economic and trade disputes. This seems likely to continue under the Trump administration which has taken, from the beginning, a strong stand against Chinese claims in the South China Sea disputes. The tension between the two countries may rapidly escalate if their naval vessels confront each other when US warships continue to sail within 12 nautical miles of the Chinese-held islands and features. The focus of the SCS disputes is no longer the interaction among the various Asian claimants. The SCS issue has been increasingly utilized by powers as a mechanism to exploit one of China’s most serious strategic and diplomatic vulnerabilities. In this context the shape of Sino–US relations will determine the future direction of South China Sea dispute management.
Bo Liang, Li Yan, Gary Quinlivan and Thomas W. Cline
As the largest emergent market and second largest economy, China is playing an important role in the global economy. China is transitioning from a major investment destination to one of the leading global investors. The United States is the top choice of international investment. Over the past five years, Chinese foreign direct investment (FDI) in the United States has been surging with a focus on the sectors of real estate, high-technology, new energy, and entertainment. This chapter explores China’s FDI in the United States by presenting background information on global FDI and China’s global outward direct investment (ODI), and examining China’s FDI in the United States at the industry and company levels. It also discusses the implications of China’s rapidly increasing ODI and provides recommendations for how to make the process constructive for both China and the United States. This chapter can also be a valuable resource for other countries facing radical FDI increase from China.