The Meanings and Global Externalities of China’s Economic Emergence

Abstract

The Chinese economy has become a multifaceted global public good. Even as China carefully and gradually rebalances its growth model from export-led to domestic consumption, it will also help address issues of global imbalances. Still, during that internal adjustment process, China will absorb increasingly large quantities of exports from around the world—including from developing countries that can strategically position themselves to competitively supply goods and services in light manufacturing and low-skilled industries which China dominated at earlier stages of its economic take-off. China’s industrial upgrading strategies, which reflect changes in its endowment structure, have defied mainstream economic prescriptions. The country’s stubbornness in designing and implementing steadfastly policy frameworks that identify potentially competitive industries and facilitate their emergence (while accounting for social and political constraints and realities) could provide useful blueprints for other developing countries. This chapter highlights several global externalities of China’s economy, and examines the opportunities and challenges they present. It also discusses some of China’s major macroeconomic risks and possible negative externalities to the world economy.