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New Pattern for World Economic Development and China's Foreign Economic Relations
2008-08-12
Fang Jin
Since the 1990s, especially from the beginning of the 21st century, the information technology revolution and the reforms carried out in various countries have witnessed profound changes in world economic pattern. Such changes are mainly manifested in two aspects. On the one hand, economic globalization continues to press forward, bringing up new features; on the other hand, the gradual emergence of many developing countries has made them an important force for world economic development. Therefore, taking the overall pattern for world economic development and its new changes into full account is a must in studying the future orientation for China's foreign economic relations.
I. New Features and Future Development Trend of Economic Globalization
1.New features in economic globalization
Economic globalization is a long-term and incessant process. In recent years, economic globalization continues to press ahead and assumes some new features in its development.
Firstly, a global market in a real sense has taken shape. Since the end of the Cold War, the market segmentation caused by political and military rivalry has gradually been replaced by market integration. Many developed countries have implemented economic deregulation. The East European countries, the former Soviet Union countries and major developing countries such as China and India have all carried out market-oriented reforms. As a result, more and more economic entities have participated in the international division of labor. The Uruguay Round brought forth a significant breakthrough in the development of trade liberalization and gave birth to the World Trade Organization covering a wider range of areas such as merchandise trade, services trade and investment. The profound changes which have taken place in most countries, regions and multilateral economic relations have created unprecedented favorable conditions for the cross-border development of productive activities. A global market in a real sense has come into being.
Secondly, great changes have taken place in the forms of international division of labor. The convenience for the cross-border flows of essential production factors has given more prominence to the effects of comparative advantages and the economies of scale of the transnational production and marketing. The international division of labor has expanded from inter-industrial division of labor to intra-industrial division of labor, while intra-industrial or intra-company division of labor is increasingly broken down and streamlined. Such changes in division of labor are dominated by transnational corporations. Through transnational industrial transfer, transnational corporations have gradually established global or regional production chains and supply chains. Trade volume conducted by transnational corporations has accounted for 1/3 of the world total. Due to the above-mentioned changes, the relationship of interests among various countries and among different circles of interests within each country is becoming more and more intricate.
Thirdly, regional trade integration has been developing fast. By July 2007, an avalanche of 380 regional trade agreements had been reported to the World Trade Organization (including those reported to the former GATT), with 205 having become effective. Besides, a large number of regional trade agreements are currently being negotiated and it is estimated that a total of 400 regional trade agreements would have come into effect by 2010. Except for Mongolia, all WTO member states have joined at least one or more regional trade agreements. It is estimated that over half of the global trade are being conducted among the nations that have joined bilateral or regional trade arrangements.
Fourthly, the mass flows of the cross-border capital have resulted in a global disequilibrium. Deregulation over finance markets in various countries has made the volume of cross-border flow of financial capital increasingly larger. According to statistics from the Bank for International Settlement, the amount of foreign exchange transactions on world financial market reached 4 trillion US dollars per day on average in 2007, up 154% over 1995. The amount of over-the-counter transactions of foreign exchanges derivatives totaled 2.3 trillion US dollars per day on average, up 160% as compared to 1995. Initially, the financial capital flew mainly across the developed countries; nevertheless, the proportion of capital flowing between the developed countries and the developing countries has been growing in recent years. In capital flows, the volume of portfolio investment and investment in financial-derivatives have been growing rapidly, while the importance of traditional bank loans has been going down. In addition, the official reserves of various countries have been augmented fast, and the distribution of the reserves is quite uneven, resulting in a global disequilibrium. In 2006, the current account deficits of the United States was equivalent to 60% of the world's total deficits and 1.7% of the world GDP, and the total surplus of the top five surplus countries was equivalent to 53% of the world's total surplus and 1.6% of the world GDP.
Economic globalization has drastically expanded the scale of cross-border trade, investment and personnel flows, but transactions, settlements and reserve currencies are only confined to currencies of a minority of developed countries, such as US dollar and Euro. The developed countries, by using their financial advantages, have shifted their domestic economic problems on to other countries, resulting in global excess liquidity all over the world. At the same time, financial institutions from developed countries are fanning the flames of disorder on the world market. All these have brought about great challenges over the management of macro-economy and financial market in developing countries.
2. Future development trend of economic globalization
Firstly，it will be hard for trade protectionism to change the overall trend of economic globalization. In the new context of the fast developing economic globalization, the links between various countries' economic interests become closer and closer. Moreover, under the jurisdiction of the World Trade Organization, trade protectionism adopted unilaterally is hard to prevail. Developed countries play a leading role in economic globalization and get the maximum benefit from it; therefore, they will not backtrack for trade protectionism. Moreover, the information technology revolution, another important force for economic globalization, is still on the rise, and the potential for enterprises and individuals to use information technology to change transnational production, operation, management and consumption models is far from being brought into full play. No matter how government policies change, the driving force and the technological foundation for economic globalization will not change.
Secondly, the uneven distribution of gains from economic globalization may affect the globalization process. Economic globalization has boosted world economic growth, but has not benefited all countries in the world. Income gaps have widened between different countries and regions and among different social groups within one country. Since 1981, the proportion of the absolute impoverished populations (who have less than 1 US dollar a day for living) of the developing countries in the global has reduced by almost half, but the reduction has mainly taken place in East and South Asia. Due to slow economic growth, the proportion of the absolute impoverished population in Sub-Sahara Africa has gone up, and the poverty in Latin America is also decreasing slowly. In developed countries, the income gap between skilled workers and non-skilled workers has been constantly widening as a result of the technological progress and the shift of industries. Since 1980, the difference in average wages of American skilled workers and non-skilled workers has enlarged by 30%. The uneven distribution of gains has worsened the conflicts between various countries and among different interest groups and is likely to change the globalization process and even to incur retrogression, which would produce uncertainty in future world economic growth.
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