2．Rise of Chinese Economy in Mighty Globalization Era

By availing the overseas markets and resources, as well as international capital and technology, China got on a rapid rise in the intensified international economic cooperation and competition and became a big winner in the wave of “mighty globalization”. It took China only 30 years to change from being insignificant in world economy to being the second largest economy. When China achieved super rapid economic growth and wealth creation, it reshaped the world economic structure to a great extent.

At the end of the Cold War, the wave of “mighty globalization” began its accelerated growth and integrated emerging economies into global economy widely and deeply, which made the competition in all sectors of economy extend worldwide. Capital flow, commodity flow, information flow and talent flow went across the border with unprecedented scale and optimized the allocation of resources globally, which increased economic welfare all over the world. However, how much an economic entity could benefit from it depended on the extent and way of its participation in the gradually intensified international cooperation and the strengthening international competition. With the powerful external power after joining the WTO, China's economy achieved rapid internationalization and performed outstanding in the “development competition”. Meanwhile, China's economic boom also led to the overall rise of emerging economies.

China's Economic Growth and Wealth Creation

China's full participation greatly promoted globalization and made itself a major beneficiary of the wave of “mighty globalization”. The 30 years of “mighty globalization” coincided with the 30 years of China's reform and opening-up. China realized economic boom in virtue of internal and external opportunities. Especially after China's accession to the WTO, the huge international markets and resources fueled the rapid growth of China's economy, and made China the biggest winner in the “development competition”. In the data of GDP on the basis of current US dollar, in 1980, China's economy scale was about USD 300 billion, ranking eighth in the world, only 1/10 of the United States; China's per capita USD 310, only 1/40 of the United States. In 2015, China's economy amounted USD 11 trillion, only second to the United States, about 60% of the latter; China's per capita USD 8,000, only 1/7 of the United States. Looking ahead, China's total GDP is expected to overtake the United States around 2030. When it will happen is still uncertain. In fact, China's economy scale's exceeding the United States will become a watershed in the history of world economy.

Unprecedented “wealth explosion”

After 2003, China's economy entered a supernormal growth stage with a super high speed at a two-digit rate, with its GDP annual growth at the maximum rate of 14.2% in 2007. If the peak of China's economic growth in the 1990s was driven by the wave of opening-up after Deng Xiaoping's South Talks, the peak in the 2000s was caused by the wave of opening-up after China's access to the WTO. Out of the impact of the Asian Financial Crisis in 1998, China's economy entered an unprecedented booming cycle detailed as: Economic growth (economic added value reflecting flow concept) was amazing, and wealth creation(total assets reflecting stock concept) was even more remarkable, as shown in Figure 2.2. Regardless of the exaggeration in terms of incremental wealth, or the inequality, injustice and other issues in distribution of wealth, in terms of per capita, the wealth possessed by Chinese people went on an explosive growth, whether it was monetary wealth or substantial wealth based on currency, whether it was denominated in RMB or USD.

This unprecedented “wealth explosion” resulted from the following factors: first, the creation effect of wealth, reflected in the expedite growth of various aspects of economic growth, material wealth and asset stock nationwide; second, the agglomeration effect of wealth, reflected in the wealth accumulation brought by China's strong attraction for capital and productivity from a global perspective; third, the revaluation effect of wealth, reflected in the recognition of China's value as a market, business site and residential place at national and international levels. Concerning the third factor, the continuous incremental liquidity at micro level turned into the asset allocation needs for economic entities (financial institutions, enterprises and households) at micro level, which rewrote the pattern of asset prices. From international perspective, continuous vast “double surplus” in international balance of payments made China accumulate its foreign assets for more than USD 4 trillion, which showed that world financial wealth was inclined to be reallocated and congregated toward China. By virtue of the concept of “oil dollar” 24, I put forward the term “China's dollar” in 2005 to refer to China's huge amount of foreign exchange assets, especially those denominated in US dollar. The similarities between both were that they all flowed out of the U. S. in the form of trade surplus, and returned or recycled by means of securities investment. Domestically speaking, the agglomeration effect also existed, which was shown in the transformation of the cosmopolis-oriented cities like Beijing, Shanghai, Guangzhou and Shenzhen, and those national economic pivotal cities with specific functions, as well as its radiative effect on the surrounding city clusters and coordinated regional development.

After the decade of “wealth feast”, China's position in world economy appeared unprecedented leap. At micro level, those held scarce assets, those invested in the assets, and especially those made large-scale investment via leverage eventually became the final winners. The huge wealth effect greatly promoted consumption and investment nationwide, also with enormous international influence. “International wealth effect” promoted the continuous large increase of outbound tourism, shopping and house purchasing of Chinese residents, and also fueled the foreign investment of enterprises and individuals in the form of “assets replacement”. However, the explosive growth of wealth was inevitably followed by bubbles. In fact, the discovery and creation of value was based on effective market supply and demand. The price rise beyond the balance between market supply and demand, especially those supported by substantial demand, will absolutely lead to excessive deviation of price from value, so as to create bubbles. Undeniably, part of the incremental financial wealth was bubbles. These bubbles were lack of support of macro fundamental factors and substantial economy domestically, and lack of reasonable parity effect and support of international competitiveness internationally.

Unprecedented transfer of productivity. In the era of “mighty globalization”, the shift of industrial productivity toward China was unprecedented in terms of scale and influence. On the one hand, China accepted a great deal of foreign direct investment; on the other hand, China became the largest manufacturing-outsourcing undertaker via consigned processing and contract manufacturing. These two aspects were closely correlated. Many foreign investment projects in China accompanied with contract manufacturing. Productivity building and international productivity transfer led to unprecedented agglomeration effect. With the advantages in numbers and costs of labor, infrastructure scale and quality, as well as complete and centralized supporting industries, China became the world's largest manufacturing country and changed the world economic pattern. Meanwhile, industrial productivity agglomeration was closely related to export growth. The “offshore production” made China a platform for assembly and export, which greatly contributed to China's export growth.

From a historical point of view, the contrast between China and Europe in industrial productivity was reversed after the Industrial Revolution in the 18th century. It was not until 30 years ago that China began its rapid catchup. With the development of service industry, western countries gradually ushered in the post-industrialization era since the 1960s. The “mighty globalization” accelerated in the 1990s and further experienced “de-industrialization” because of the external transfer. Take the United States as an example. The population of manufacturing employees became smaller since the 1990s, with the downward trend continuing until 2012. On the contrary, China seized such a historical opportunity at the turning point to achieve the development at a super-high speed of heavy industry by virtue of the international demand in the “mighty globalization” era. It was a new round of industrialization based on international market and the resources after the primary industrialization in the planned economy era. Looking into the situation in recent years, among the total of more than 500 major industrial products, China ranked top in the world in terms of the output of more than half whereof and took the lead in many industrial sectors.

The relation between industry and agriculture, benefiting from the “price scissors” of industrial and agricultural products in early industrialization, to a certain extent, was at the cost of the contribution of rural areas and farmers. The new round of industrialization was to make full use of the surplus labor in rural areas and direct the contribution of rural areas and farmers into industrial development on the basis of migrant worker system. Statistics showed that the total number of migrant workers nationwide has reached 270 million, equivalent to one Indonesia, two Japan, and three Vietnamese. The large-scale, low wages and low welfare of the migrant worker system provided the style of “made in China” with unique cost advantage in the international competition of labor-intensive industries. Along with unprecedented capacity building, there has been an unprecedented scale of production facility; a large number of employees and factories with large production size recruited migrant workers to work on industrial assembly lines. Foxconn's production base in Shenzhen once contained 300 thousand people. Such large-scale industrial production might be the most significant change in the pattern of industrial production since the advent of the assembly line mass production model in the 1910s. As for the influence, the huge rural surplus labor force was mobilized and continuously directed into the industrial sector and became a major factor in boosting China's labor productivity. From a worldwide perspective, China's huge number of migrant workers was included in the international labor division system and thus becoming the main force in participating in globalization. In recent years, the growth of number of migrant workers gradually slowed down and began to reverse, which to some extent meant the end for migrant worker system to act as the incremental impetus of rise of productivity and grow of economy.

Multidimensional impact of globalization. Other aspects of globalization included the flow of people, information and knowledge, which are also important to China's development. With the efforts of modernization since the 20th century, China was trying to narrow the gap with the west in “knowledge stock”. However, it is the flow of people and information in the “mighty globalization” era that has greatly promoted the learning effect and knowledge transfer, which has made China rapidly narrow its gap with developed countries in a relatively short period. The flow of personnel and information has promoted the upgrading of human resource in China, brought in the effects of powerful technology transfer and spillover, as well as imitating and learning opportunities, and provided an important way for realization of “late-mover advantage”. Labor flow is a relatively weak part of globalization. However, with the international investment and offshore production of transnational corporations, the “relative international flow” of labor force has actually appeared. It is worth noting that excellent talents are an important part of international labor flow in the global age. For a country, the endogenous cultivation of talents is fundamental, while attracting overseas talents is an important supplement. Especially in the United States, cultural characteristics, education system, talent market and other factors determine its unique competitiveness in drawing in top talents in the world. Obviously, China is trying to catch up in this respect. Apart from economic aspects, in the era of mighty globalization, China's “social transformation” and “environmental pollution” also turned out to be in “acceleration”. The impact on the environment of economic globalization, a problem that has been neglected, is worth exploring further.

Rise of China's Economy and Reconstruction of World Pattern

From the cognition about the pattern of the world economy, a significant change in the era of “mighty globalization” is the change of analyzing the world economy from by means of “dichotomy” to by means of “trichotomy”, and the rise of the Chinese economy has played a decisive role wherein. The so-called “dichotomy” reflected the relation in the Cold War between the east and the west respectively led by the former Soviet Union and by the United States, and also reflected the relation between the north and the south, respectively represented by developed and developing countries. Accordingly, an important theoretical paradigm of early development economics was also based on the perception of the so-called “core-periphery” relation, as well as the analysis of the economic relation between the north and the south. In the era of “mighty globalization”, emerging economies as a part of the developing world developed rapidly, but because of its great proportion in the market, the solid economy strength, and its growing share in world economy, trade, finance and investment, the emerging economies is increasingly regarded as an important pole in world economy. Therefore, the “dichotomy” has come into being. As far as specific economic impact is concerned, the “China's influence” in the era of “mighty globalization” is extremely significant. The rapid rise of China's economy has reshaped the world economic structure.

Since the end of the Cold War, the advantages of the western economic system characterized by market and openness have been revealed, and the experience of East Asia has been valued by other developing countries. “East Asian miracle” was resulted from the basic role of market economy in the allocation of resource and the effort of “developmental states” in promoting positive policies for industrial development and economic growth, and also from the implementation of export-oriented economic development mode and strategies. Since the 1980s, the main developing economies have promoted market-oriented reforms, and began to integrate into the international economic system with positive attitudes. Of course, different countries responded to changes lowly or quickly. China took the lead in reforms since the late 1970s after recalling for painful experience. Other big economies began to follow suit, such as India, which started its market reform in the early 1990s. In the context of mighty globalization, the emerging market economies rose rapidly and rewrote the world economic pattern. From the perspective of financial wealth, emerging economies and developing countries, as a whole, had their total foreign exchange reserve continue to rise and reach the peak of USD 8 trillion in the middle of 2014, accounting for 2/3 of the global total reserve. In addition, emerging nations and developing countries accounted for around 85% of the global total sovereign wealth which amounted about USD 7 trillion. From the view of distribution of world economic power, the “Triad” of the USA, Europe and Japan formed in “partial globalization” era began to be replaced by the new “Triad” of China, the USA and Europe.

Under the “mighty globalization” background, the relations between China and other developing countries underwent profound changes. On the one hand, the economic rise of China provided great opportunities for the economic development of other developing countries, which was marked by China's huge market, scale-growing development financing and foreign investment. However, owing to the basic international division of labor and the status of China in the “mighty globalization”, China's import demand for other developing countries and regions tended to be natural resource and primary commodities. Such “global division mode” was formed and strengthened after China's entry into the WTO. Since then, China became a “world factory”, absorbed vast natural resource from other developing countries and resourcestyle developed economies, and meanwhile exported a large quantity of exports of manufactured goods to developed countries and some developing countries. Of course, China, to some extent, was an “assembly shop” that had to import large quantities of technology and high-end components and parts from developed countries.

Such intensification of “global labor division mode” made China the largest buyer of primary commodities. Since the early 2000s, several years after the financial crisis, the global commodity market experienced a long growth cycle. During this period, resource exporting countries gained great profits. The formation and continuity of the “bull market” of primary commodities were closely related to the huge increase in demand of China. It can be said that resource exporting countries benefited greatly from China's rapid economic growth. Especially when the global financial crisis broke out in 2008, the “bull market” of primary commodities should have ended, but it continued for several years under the powerful stimulus of China's investment plan for RMB 4 trillion. Therefore, in the first few years after the end of the financial crisis, a lot of low income countries based on resource export and Australialed developed countries based on resource export still performed well in economy, which appeared an obvious reversal in the middle of 2014. Of course, it should also be noted that the “global labor division mode” strengthened the position of resource exporting countries in the international division of labor, and might also have a negative impact on the industrialization of these countries. In addition, China's economic rise also brought a certain degree of competition to some of the developing economies, which was similar to China in terms of development mode and stage, such as some of the Southeast Asia and South American countries.

Now, China has become a major trading partner and an important investor for many developing countries, and has also begun to serve as a key source and supporter of financing. With the continuous strengthening of China's role in these areas, the scale of its overseas commercial interests will continue to expand, with expansive opportunities for mutual benefit development. In the future, the low income countries in Asia (including Southeast Asia and South Asia), Africa and Latin Americas expected to benefit more from investment, technology and market demand of China, and achieve faster economic growth through joining in the “wild goose formation” of development worldwide. As the largest developing country, China's rapid development in the 30 years of the reform and opening-up was ascribed to the “global dividend”. From a broader perspective of international relations, China's development could not do without the peaceful and stable international environment, and the importance of “peace dividend” for China's development should not be underestimated. It was connected with the international order dominated by western countries, and more with China's independent foreign policy for peace.