Pillar of stability and growth
As the world grapples with new uncertainties, China provides a crucial economic anchor
Among multinational corporations, a sense of unease with today’s conflicts and sanctions is understandable, as they need to address shortterm fluctuations and at the same time take an informed and confident view of the bigger picture.
Given its important role in international affairs as the world’s second-largest economy and potentially the largest market in the world, China is providing an anchor amid global uncertainties.
China is the largest trading partner of many countries and is the epicenter of many global supply chains. It became the largest trading nation in 2013, and its largest trade partners include the European Union and the United States as well as geographical neighbors Southeast Asia, Japan and South Korea.
China is a member of the Regional Comprehensive Economic Partnership, a regional trade agreement with 15 countries that account for 30 percent of the world’s population and 30 percent of its GDP. The RCEP is the world’s largest free-trade agreement.
China’s quickly burgeoning middle-income population has become a substantial consumer of goods and services.
According to the National Development and Reform Commission, China’s middle-income population has exceeded 400 million, with increasing market potential for imports.
China has consistently been opening up market access for foreign companies. The nation’s foreign direct investment inflows are now the largest in the world, and foreign companies are being provided with even wider access. In 2020, as the coronavirus outbreak spread across the world, FDI inflows into China grew to $163 billion, compared with $134 billion into the US.
China has successfully shed its copycat image and is now viewed for its innovation. It sets its own standards in technology protocol, the creation of new business models and pioneering applications of the central bank digital currency. Its ability to define new lanes of innovation is becoming increasingly profound. Barring extreme unforeseen events, China’s role in global business and commerce is unlikely to diminish.
China’s internal policy focusing on technological innovations should structurally shift the patterns of global business and commerce going forward.
Its effective governance system, well-functioning clusters of industry segments and suppliers, and a general sense of “can do” attitude make global supply chains in China even more important for the world economy.
However, apprehensions of some degree of decoupling and sanctions could complicate global supply chains. Total decoupling is highly inconceivable.
Globalization just may enter a new era. China now strives to ensure that domestic demand and supply reinforce each other, while it continues to pursue external trade. These shifts in emphasis will be the main drivers of globalization.
China is searching for its own form of modernity, with Chinese characteristics. Its modernity combines both the old and the new, Chinese and non-Chinese thought, collectivism and individualism, and ideology and pragmatism. It is inclusive in nature and yet allows for experimentation.
Achieving these goals will take time and require stability, strategic focus and composure. All of these will lead China to play an even larger and more important role.
The key to any sound strategy is the ability of leaders to develop a clear and informed view of the future and guide future growth on the basis of synthesis of the past and the present.
Multinational corporations need to be vigilant and be able to visualize China’s role in the world going forward. A growing number of them are realizing that their global strategy has to have China at its core in the new era.