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China Within the World

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How Does China’s Reemergence Impact the Current World’s Dynamics?

* Background
China’s reemergence
In retrospect, there were three glorious dynasties of Han, Tang and Ming in China. During that time China took the leading position in economics, politics, culture, military and diplomacy. But after Ming dynasty China lost its leading position for a long time. Since the reform and opening-up in 1978, China’s reemergence of economics impresses the world substantially. In 2010, China witnessed GDP of 5,878.3 billion US dollars, which is at the second place just following United States 1. During the last decade, China moved from the being the ninth-largest exporter to the largest in the world. According to the Global Competitiveness Index 2011-2012 report, China’s global competitiveness index scored 4.90 and ranked 26 out of 142. The group performance of the developing world is boosted by the strong dynamics of some of the largest economies including China. At the meantime, China’s military power is also strengthened. From 1989 to 2010 China's official military budget increased by double digits every year 2.
Based on above positive and negative facts, China’s reemergence really impacts the world’s dynamics in various dimensions. In general these impacts can be divided into areas including goods, technology, people, capital and culture.

* China’s reemergence impacts world’s dynamics in different aspects
Goods
According the percentage distribution of Merchandise Exports data of 11 main economies3 in Asia, China’s percentage grew from 10.3 percent in 1995 to 29.1 percent in 2007. By 2007, China has replaced Japan as the dominant exporter. China’s exports grew at a rate of over 30 percent annually after 2001, and imports grew more than 28 percent annually4. Over the past 28 years, the value for this indicator has fluctuated between $1,581,420,000,000 in 2010 and $20,707,000,000 in 19836.
China has become one of the main manufacturers of world’s goods. Most of the global top 500 enterprises set up their business sectors and factories in China. There is a trend that many US and European companies are investing more money in R&D and manufacturers in China. Fast growing data shows that China’s reemergence of world’s goods has led to preference changes. China provides foreign investors with a huge and potential market of great demand, growing high income consumers, larger income convergence and falling trade costs.
Although many European goods may be suffered from shrinking market and economic downturn, they are more likely to gain new earning growth in China’s market because of large demand and supply. China not only contributes to be a world’s leading producer but also a consumer buying goods of different industries and levels.

Technology
China’s reemergence in technology also attracts, develops and retains many world’s leading IT companies, R&D centers, manufacturers, suppliers and buyers. According to a report of the European Commission, China surpassed the US, EU-27 and Japan and emerged as the largest high-tech exporter in the world. For instance, in 2009 China’s export in the iPhone amounted US$4.6 billion its annual export in laptop PC valued at US$52 billion5. Furthermore, China’s software industry is undergoing a “golden decade”, and a number of outstanding companies have emerged. Technologies including electronics, computer, software, Internet, telecommunications and cloud computing are the driven power of China’s high-tech industries.
In terms of influential power of these technology development and advancement, China’s booming high-tech industries are set to attract investment from various countries and promote international exchange and cooperation. However we could not get the conclusion that China is growing to take a lead to impact world’s dynamics. We will find that the assembled technology products using imported parts and components will inflate China’s export value.
With this understanding I think China’s strength in assembling and attracting foreign technology will accelerate the world’s technology improvement and fast growth but China still needs a long time to be the first mover of innovative technology and game changer.

People
China has a population of over 1.3 billion. China’s immense population provides a low-cost labor market for foreign investors who are hungry for the market. It may be difficult for people with international exposure to avoid using products or services “Made in China”. It seems China is becoming a world factory to assemble various products.
It is obvious that during the past decade both China’s external and internal migration influenced the world’s talents structure in a quantative and qualitive way. From external perspective, many first-class Chinese talents choose to further broaden their view and study abroad. Some of them became local citizens in developed countries while others returned. On the other side, China’s reemergence draws attention of expatriates from multiple countries. From internal perspective, because the current situation of unbalanced development between first tier and three to four tier cities, people of inner land of China are moving toward coastal cities and became new citizens of them. With more opportunities provided by many MNC companies, talents from all over China are hired and migrated to first and second tier cities.
To sum up, Chinese people are changing its position to be a worldwide manufacturer to meet the demand from any possible corner of the planet. Furthermore, imports and exports of people impact the world’s dynamics through changes in demographic structure and intangible asset of talents.

Capital
China’s economic reemergence leads to capital inflow and outflow. Since the reform and opening-up policy of 1970s, China’s need for foreign borrowing is decreasing. The foreign reserves and are conserved and enhanced. Furthermore with increased domestic productivity, taxable revenue also increases. China’s reemergence sends a strong signal to the world of potentially be a competitive market and attract the much-needed foreign capital. During last 30 years, China has designated five special economic zones (SEZs), fourteen coastal open cities, six open economic regions, and numerous economic and technological development areas6.

Culture
More and more foreigners are willing to learn Chinese and know Chinese culture. Some key values of Chinese culture like Confucian, Taoism, relationship (guanxi), doctrine of the mean and harmonious relations between individuals and countries are understandable for people from other countries and some of them are changing their behavior to adapt to them. In order to do better business with China, understanding and get aligned to these values are becoming important for foreign investors.

* Summary
To answer the topic in a brief and effective way, we could say China’s reemergence impacts the world’s dynamics from different dimensions. For some dimensions like goods, technology and capital, China is playing a role of building attractiveness for foreign investors and accelerating regional cooperation and exchanges. On the other hand, for dimensions like culture and people China is impacting the world by improving their recognition and understanding of traditions and facts even they are contradicted with western value system.

Endnotes 1 [The Global Competitiveness Report 2011-2012] 2 [China's reemergence as a major power doesn't challenge US] By Joseph Nye, Jr. (Caixin Online) 3 [Source: ADB]
4 [Why Has China’s Trade Grown So Fast?] from Emerging Markets Finance & Trade January–February 2011, Vol. 47, No. 1, pp. 90–100
5 [China’s High-tech Exports: Myth and Reality] by Yuqing Xing
6 [China's economic restructuring through induced capital inflows] by Victoria Mantzopoulos, University of Detroit Mercy and Raphael Shen, University of Detroit Mercy

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