China and Globalization

Nicolas FOUCRAS PhdUniversity TEC de Monterrey

nicolas.foucras@itesm.mx

• 1978: begins the transition to market economy and started to draw FDI

• 1981: the First Special Economic Zone is opened; it allows to connect with the global economy and to start the industrial upgrading

Current panorama• China has the world’s largest foreign exchange

reserves • 1st exporter since 2014 followed by USA• 1st creditor of the USA, Africa, LAC (directly or through

development banks)• 1st producer of manufactured goods• 1st exporter of manufactured goods• 2nd importer of manufactured goods• 1st importer of natural resources (oil, copper, cotton…)

Most important population however a marked ageing is expected

Export Share for China and USA: China overtook USA in 2014

China is importing raw materials from all over the world

In 2006 China became the first responsible of the world productions of carbon dioxide (CO2) followed

by the USA

Exponential growth of CO2 emissions during the last decade while it is stabilizing in USA and EU or

decreasing

• It started to develop a high value-added industry (thanks to Western and Japanese technological transfer): automobile, satellites, trains, computers, cells, domestic appliances…

• The iternational weight of chinese MNFs is growing and they are developing international value-chains (China’s FDI multiplied by 3 between 2001 and 2013)

• It has started to outsource/subcontract low costs activities and labor intensive in ASEAN countries => it can maintain its competitiveness– It has also transferred activities with important level of

pollution => it may commit itself to respect international rules

• 5th country to produce FDI • 600 million people have left “poverty” between 1981-2008

according to the WB (Tello 2010) => huge potential market first for national firms

1st producer of cars

Chinese investments (2005-2010)

FDI focused on the commodities

• 1st country in terms of savings• National currency (RMB) is more and more used in

international trade => it gives more stability for the import of commodities and energy supplies because it can pay in its own currency

• 1st electricity and coal consumer • 3rd reserves of coal• 2nd oil consumer• 1st buyer of gold => improve the international confidence in the

economy• Very active for Foreign aid (Africa, Asia and then LAC):

– It appears as one of the biggest contributors– It allows soft power to improve its political power– It facilitates investments in natural resources exploitation

Important national saving rate

Use of currencies in the international economy: growing participation of the Yuan

China is buying gold

Reserves of coal in the world: China is the 3rd

Period 2000-20111. Ghana2. Nigeria3. Sudan4. Ethiopia5. Mauritania6. Angola7. Equatorial

Gnuinea8. Zimbabwe9. Cameroon10. South Africa

• Regional activism and strategic alliances • BRICS• Asian Infrastructure Investment Bank (AIIB)• ASEAN–China Free Trade Area (ACFTA)• Regional Comprehensive Economic Partnership

Agreement (RCEP)• Shanghai Cooperation Organization (SCO)• Numerous FTAs

• China-CELAC summits

• China does not want a G2: It prefers G20 to be able to be stronger against USA through alliances with other countries

• It seeks to ensure its food security (buying or leasing lands everywhere but above all in Africa)

• It seeks to develop energy access and to ensure energy security: Shanghai Cooperation Organization (SCO), FDI in Africa and LAC, participation in regional banks and using Foreign Aid

• It seeks to secure commercial routes to ease its exports/imports (“String of Chinese Pearls”)

• It can count on a strong military force:– 2.2 M soldiers– 2nd biggest defense budget– It is improving its projection capacity in the region

String of Pearls refers to the network of Chinese

military and commercial facilities with the purpose

to secure:

Exports of goods to EU and USA and imports of

commodities

This network includes • Several major maritime Straits

like Mandeb (connecting the Red Sea with the Gulf of Aden), Malacca (Mal.), Hormuz (Persian Gulf and the Gulf of Oman), Suez and Lombok (Ind.)

• China is investing and building port infrastructures to ease its export and imports in different strategic points in Pakistan, Sri Lanka, Bangladesh, the Maldives, Somalia, Nigeria, Togo, Belgium, Greece, USA and including the huge project o build a new channel in Nicaragua