The shift of China's economic center of gravity cannot be ignored
Special Commentator/Zhang Jun
Published in the 957th issue of China News Weekly on July 7, 2020
Many countries have adopted the policy of closing the country in response to the spread of the new crown pneumonia epidemic, leaving the global economy almost paralyzed due to the interruption of the supply chain. But this is not the fault of the supply chain, nor is the decentralized global production chain very fragile, as many people have assumed. What is really fragile is people's belief in globalization. Due to excessive concerns about the dependence of the global manufacturing industry on China, the so-called domestic priority theory aimed at isolating China has been rampant, and the United States has even threatened to decouple from China in the technological chain to prevent China's continued economic development.
It is undeniable that the fear of China's expanding economy is dominating the trade and investment policies of the United States and even more countries against China. But the assumption that China’s continued development is increasingly dependent on its good use of the global free trade system, and even the idea that cutting off technology supply will kill China’s economy is an exaggeration. In fact, although China still plays an important role in the global manufacturing industry today, at least for the past 10 years, the huge domestic investment market and super purchasing power have been the real pillars of its economic development. As a result of deepening the huge domestic market, China has rapidly become one of the countries with the largest number of technology companies in the past 10 years.
The center of gravity of China's economy has deviated from the track of the so-called "external cycle" and shifted inward. But its meaning has not yet been sufficiently evaluated and fully understood. One of the reasons is that the past discussions of economists have diverted people's attention because they have been critical of China's investment expansion policies that have been implemented for many years in the past, and they are worried about the potential debt risks caused by these policies. This cannot lead people to view the rationality of China's attempt to shift its economic center of gravity. As a result, politicians in many countries, including the United States, are still accustomed to using global trade data and supply chain theory to understand China’s economic development. We have seen that all the accusations and complaints against China ended in restricting China’s exports or restricting the export of technology to China. In other words, according to the theory of technology supply chains, the most direct way to prevent China's economic expansion is to block this "external cycle" on which the Chinese economy depends.
However, for many years, when economists have used the theory of global supply chains to reveal the secret of China's economic success, China has actually tried to reduce its excessive dependence on this "external cycle." The reason is not only the escalating trade friction with the United States soon after entering this century, but also because the expansion of the economy needs to overcome the fetters of structural imbalance.
At the same time, in order to realize the shift of the economic center of gravity, from relying on the external circulation strategy to relying on the internal circulation strategy to promote sustainable economic development, China has averaged over 20% of its highways, railways, airports and ports in the past 15 years. Continue to invest in the transportation network to enhance and expand its capabilities. Since the beginning of this century, China has encouraged and supported the large-scale construction of information and communication infrastructure networks, and allowed and supported private enterprises to show their talents in the digital new economic fields such as mobile payment, e-commerce, Internet of Things, and smart manufacturing. The Chinese government has decided this year to launch a new round of investment plans for new infrastructure represented by 5G base stations on a large scale.
The 2008 global financial crisis severely impacted the Western economy and gave China an opportunity to accelerate its economic shift. The importance of developing the domestic market and promoting the domestic cycle is increasing.
Even if the economic center of gravity shifts inward, China will not be isolated from the global technology supply chain in the next 20 years. On the contrary, China will still be a participant in the global trade and investment system. China's efforts to turn to create greater domestic demand to promote economic development will provide opportunities for Chinese local companies to expand and internationalize faster, and will also create opportunities for global investors and multinational companies, which will inevitably benefit the global economy increase.
China News Weekly, Issue 27, 2020
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