China and world economy: New features in their relationship

2017-10-17
english.gov.cn/Xinhua

In the past, China’s economy was often described as being “integrated in the world” by international analysts. But now, China is playing a more active role, with other countries riding on its development.

China has seized the opportunities arising from shifts in the world economic landscape in recent years. The relationship between China and the world economy is now displaying some new features.

Power of Chinese market

The Chinese market is increasingly significant for the world economy, as its import volume ranks No. 2 in the world in the past five years.

China, with its population of over 1.3 billion, is so huge a market that even the scale of markets such as online ordering and nail care can exceed the whole auto industry of a small country, according to the UK’s Economist.

According to a report from the World Economic Forum, the competitiveness of China’s market scale tops the world. The Forum’s economist Thierry Geiger said the index covers the domestic and export market, in which domestic demand prevails.

It is expected that, in the next five years, China will import commodities worth as much as $8 trillion, and China’s outbound tourists will make 700 million trips.

Investment: from one-way to two-way flow

China is injecting energy into the world through expanding overseas investment, while at the same time, maintaining its strength in absorbing foreign investment.

In the next five years, China is expected to absorb foreign investments worth as much as $600 billion, while its investment volume abroad will reach $750 billion. China is exploiting both the domestic and international markets to achieve sustainable development.

In order to remain attractive to foreign investment, China is cutting restrictions in market access.

Foreign investment in China is being upgraded, as foreign companies invest more in high-end industries. In 2016, foreign capital actually used by China’s high-tech service industries grew 86 percent from a year earlier.

In terms of overseas investment, China is seeing fast growth and an expansion from merely the Greenfield Investment to multiple patterns such as cross-border mergers and acquisitions (M&A), equity participation and overseas listings.

According to data from the United Nations, in 2016, global overseas direct investment fell by 2 percent, while China’s overseas direct investment volume (ODI) surged by 44 percent to $183 billion, becoming the second-largest ODI country in the world.

Li Bo, a researcher from Japan’s Aichi University, said that in the context of rising protectionism, China is promoting global economic cooperation through expanding overseas direct investment.

Innovation: From imitating to surpassing

China is the only developing country dashing into the top 10 among G20 countries for innovation competitiveness, with more than a million patents, and it’s the birthplace of one-third of the world’s unicorn companies in 2017. Over the past five years, China has become an important player in the world of innovation.

For a long time, China introduced and imitated advanced technologies, but now it is making great efforts in pushing forward innovation, even making some breakthroughs, turning from follower into leader in the world innovation arena.

“China advocates entrepreneurship, and supports entrepreneurs with financial aid,” said Khairy Tourk, a professor at Stuart School of Business, Illinois Institute of Technology. “Few countries in the world would issue such a strong support.”

Philosophy: From learning to cooperation

Setting up the Asian Infrastructure Investment Bank, driving forward the construction of the Belt and Road Initiative, and building an open world economy are all new concepts from China in recent years. Many developing countries now turn to China to draw from its experience.

“As globalization has been relegated to the back seat, now the world is reconsidering China’s economic policies,” said Liu Di, professor at Japan’s Kyorin University. “China is adept at learning, brave in innovating, giving light to many problems of the 21st century.”

China’s economic development philosophy maintains its independence while blending into the international society, drawing upon other countries’ successful experience. In the future, the communication between China and the world will definitely bear more fruitful results, according to overseas observers.