European Integration in a Global Economy
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European Integration in a Global Economy

CESEE and the Impact of China and Russia

Edited by Ewald Nowotny, Peter Mooslechner and Doris Ritzberger-Grünwald

The expert contributors focus on global imbalances and accompanying policy challenges, competitiveness and trade, the sustainability of current growth strategies, and banking and financial stability in the light of the global economic and financial crisis. They provide a multi-disciplinary assessment, combining the views of high-ranking central bankers, policymakers, commercial bankers and academics, and demonstrate that a broad view of European economic integration is crucial given that spillovers and contagion were major issues of the recent economic crisis.
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Chapter 15: The impact of China and Russia on catching up in South-Eastern Europe

Altin Tanku


Globalization has been a key driving force behind economic development since the early 1990s, triggering significant changes in the world economy, most noticeably increasing production efficiency and lifting millions out of poverty. For Europe as a whole and above all for the economies of Central, Eastern and South-Eastern Europe (CESEE), the key defining element of this process has been the collapse of the socialist regimes that opened up eastern and western societies to each other for trade and investment. Developed Europe responded to these developments with investments and the promise of European economic and political integration. At the time of writing, most transition economies are actually enjoying full EU membership and working toward monetary union. The pace of progress has, however, not been the same throughout CESEE: the South-East European countries (SEE) are lagging behind. In parallel, economic liberalization processes have changed the global economic landscape. Russia, around which almost all former socialist economies in CESEE used to gravitate, has itself become one of the transition economies and turned to fixing its own economic, political and social system after losing influence over its former partners. China embarked on a process of economic transformation since 1978 that has enabled it to become the second-largest economy worldwide and a major trade partner for the rest of the world. In addition, former poor economies are now powerful producers of commodities that used to employ the bulk of the labour force in developed economies. Both China and Russia are relatively big economies that can affect the growth performance of other economies along several channels, most notably the trade channel. China’s and Russia’s export-led growth, based respectively on cheap labour and terms of trade, has given rise to huge international reserves, making them potential investors in the rest of the world’s economy. There is empirical evidence that the Chinese growth momentum has spilled over to other countries’ business cycle. China’s growth in explaining output fluctuations in other countries has increased in recent decades and is now one of the key external variables explaining such fluctuations (Arora and Vamvakidis, 2010, p. 7). Several other works, including Autor et al. (2011), Rodrik (2011), Spence (2011) and Sachs (2011), have discussed these implications on the labour market, income redistribution, industrial development and so on.

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