The economics of China are a mystery to most investors. It has grown so fast that many do not fully digest the magnitude and influence of China on the rest of the world economy. Even for those who do understand the impact of China, there is limited understanding of how it got to its position and its economic development through time. As important, understanding the relationship between China and globalization is critical.
Yeling Tan, non-resident senior fellow, PIIE, discussed "China's Development Models in an Era of Global Disruption" and concluded that China has had a conflicted relationship with globalization and has engaged in a hybrid development model.
The 1980's were a period of reform and opening especially with trade liberalization along the coasts. The 1990's saw an explosion of growth based on coastal development followed by a retrenchment during the Asian financial crisis that focused on state-led spending. The period of WTO entry was another era of strong growth but with a resistance to true opening of trade. The global financial crisis again caused a shift away from external growth thinking. The Belt and Road Initiative was another outreach for growth but on terms favorable for internal development. The Trade War with the US again caused a change in globalization focus with more emphasis on diversity and decoupling. Currently, the COVID pandemic creates a focus on internal systems and structures and less engagement.
Globalization and engagement have had a mixed history with China's development. It is important to understand that China swings between external and internal focus which impacts growth, development, and integration with the rest of the world.
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