The Economic Rise of China and its Regional Impact

Posted: March 17th, 2024

The Economic Rise of China and its Regional Impact
1. Introduction
China’s growth in the current global economy has become a significant trend. China’s economic growth and structural change have led it to be a major player in the global economy. The purpose of this report is to analyze the economic rise of China and its impact in the region. To guide the whole analysis, the report will first start with a comprehensive background of China’s economic growth over the past few decades. By doing so, it will ensure that readers can understand how China has transformed from an underdeveloped country to the second largest economy in the world nowadays. In this step, the analysis will include economic growth, social development and also the internal structural change in the country. Then, the report will move on to focus on the significance of China’s economic rise in the region. This part of the analysis will underline different aspects in terms of how China can exert its influence to the neighboring countries and the possible consequence of China’s actions. This preliminary plan will provide an initial understanding how China’s economic rise could have such a widespread impact across the world and especially in the Asia region. Lastly, a brief introduction of the content of each section in the report will be provided. This section will show logically how the whole analysis will be carried out and what aspects will be covered in each section. It will facilitate the smooth flow of the analysis. In general, this report will probe into the vast topic of China’s rise and it has been found that the rise of China is indeed affecting many countries and have changes in many particular areas from economic to military. This report hopes to provide a comprehensive sign to explain the phenomenon of China’s rise and how the world, particularly the neighboring countries, have been changed due to the rise of China.
1.1 Background of China’s Economic Growth
Since its economic reforms in 1978, China has undergone a significant economic transformation and emerged as one of the fastest growing economies in the world. The introduction of the “open door policy” and the shift towards a more market-oriented economic system have led to higher productivity, increased industrialization, foreign direct investment, and technological and managerial transfers from global economic powers like the United States, Japan, and the European Union. With the rise of the export-oriented economy and a focus on labor-intensive light manufacturing industries, the Gross Domestic Product (GDP) per capita has been growing on average 8.5 percent per year in China in the past three decades. The level of China’s GDP has surpassed Japan and become the second in the world since 2010, and the share of the world total has been rising from 3 percent in 1999 to 10.4 percent in 2015. On the other hand, the impoverishment ratio of China also reveals the achievement of economic growth. The number of rural poor has almost halved between 1990 and 2010 because of the economic growth, and the percentage of people living on less than USD 1.9 has decreased from 32.2 percent in 2002 to 4.1 percent in 2014. Also, life expectancy in China has increased from 67.9 years in 1980 to 75 years in 2015. This rapid economic development is located in specific areas of China, especially the coastal areas of east China and the urban cities. For example, Shanghai generates 2.5 percent of China’s total population, but its GDP accounts for almost 8 percent of China’s total. This has led to the development of a new urban class in China, and a huge number of rural migrants have moved to the cities to seek better opportunities. It has been done at the expense of the environment because of the heavy industrialization in the urban areas. The total emissions of carbon dioxide in China have been rising significantly from 840.2 million metric tons in 1990 to 9,040 metric tons in 2017.
1.2 Significance of China’s Economic Power in the Region
In addition, once these networks are completed, China’s economy will massively benefit from a reduction in transportation time and cost for moving goods. As a result, this will likely lead to more Chinese exports to its regional partners. These facts further cement the notion that the current trajectory of China is on a path to regional pre-eminence. Given its size, commanding the world’s largest robot workforce at 87,000 robots, and mass production capabilities, the economic significance of any potential shift to regional pre-eminence cannot be understated.
Besides work, capital investment by China in the region is also playing a significant role in elevating the country to the status of a regional economic fulcrum. For example, Chinese companies have struck large rail construction deals with Indonesia and Laos, and following the One Belt and One Road strategy, they intend to connect the railways through Thailand, Malaysia, and Singapore. Through these investments, China is linking the regional countries into a network of trading partners. This will help the spread of advanced Chinese goods and increase the level of economic power that the country already has.
Through the construction of physical infrastructure such as roads, bridges, and ports, China is expanding its trade routes and making its economy more integrated with those of other countries in the region. As a result, there are increased opportunities for companies to produce goods and take advantage of the various markets that are now connected via the Belt and Road Initiative. This can be seen as one reason why China now has higher growth rates for its exports compared to when they were still predominantly going to the Western world.
One of the most visible ways that China uses its economic power to influence the region is through the Belt and Road Initiative. Also known as the Silk Road Economic Belt and the 21st Century Maritime Silk Road, this is a development strategy that focuses on connectivity and cooperation shared between China and the countries that lie on the original Silk Road which connected Europe, the Middle East, and the Orient. The initiative was launched in 2013 and, as of 2017, over 60 countries are participating in this project, including many in the surrounding regions such as Myanmar and Thailand.
China’s economic powerhouse is setting a new and unprecedented scale in the current economic world. As stated in the CIA’s report, the rising Asian giant has been the fastest growing Asian nation for the past quarter of a century, with an average annual GDP growth rate of almost 10%. The significance of this economic power has been felt not only within its own territories but also in the surrounding regions such as Southeast Asia, South Asia, and the Pacific.
2. Economic Influence on Neighboring Countries
Over the past two decades, China’s economic presence in Asia has grown exponentially. China’s economic rise and active diplomacy have allowed it to develop some global relationships that are driven both by self-interest and pragmatism. Now, China is the leading trade partner for most of the Asian countries. This has many possible dissimilar implications. Love for China’s economic might and the access to the country’s big market has made many Asian neighbors more nutritious to Chinese regional proposals, such as the Asian Infrastructure Investment Bank and the “One Belt, One Road” initiative. Concerning the issues of exports and imports, neighboring countries rely on Chinese markets more than China does on theirs. For instance, China’s major trading partners such as South Korea and Japan, both export over a concerning fifth of their total produced goods to China. On the other hand, Vietnam is the country that relies more on Chinese markets, as nearly a part of all Vietnamese exports end up in China. These numbers show that Vietnam is politically but not economically affianced with China, as current’s Vietnamese communist regime often backs up Chinese proposals. However, by doing so, local industry has yet more overwhelmingly relied on its bigger neighbor, which potentially leads to endogenous growth of the Vietnamese economy. This power difference is nonentity new when it comes to the world economic order, as the U.S., the EU, and Japan have made the similar sort of disparities as well. Nevertheless, the ascendency of China in Asia is always linked with the complaints about the possible overshadow and external interference in the internal issues. In today’s globalized world, states by the believes that interdependence is the key to mutual success and evolution of all participants. However, the reality is that some may take more share in the collaborating process, eventually leading to the established hierarchical system in the interconnected sphere. With the emergent perceptions of China’s revolutionizing military, the Asian neighbors have initiate to turn their looks on the U.S. and other allies for reassurance, mainly in response to Chinese assertion in the South China Sea and East China Sea. Political relations with China are complex, and the heart of the matter is in the multifaceted nature of the economic benefits. This also leads to a possible discourse on the management of this interdependence of the worlds, and how developing states should respond to the economic encouragements from the main global agents.
2.1 Trade and Investment Relations
In the past, China had relations with its neighbors that were super strong. During that time, China’s main goal was to maintain its independence and focus on self-reliance in terms of economic development. However, in more recent times, with China’s deepening economic reformation since the early 1980s, China has gradually opened itself up to the world in terms of trade and overseas investment. This has resulted in a deepening interdependence between China and the global economy, as well as between China and its neighboring countries. In terms of trade, China has rapidly integrated into the world economy. According to the World Bank, China’s economy now represents around 13.7% of global GDP, and China is now the world’s largest trading nation. It contributes nearly 13% of the world’s total trade of goods, measured as the sum of exports and imports. However, China’s trade with its neighboring countries is even more significant. Data from the World Bank shows that China’s neighbors, such as Japan, South Korea, India and Vietnam, are now some of the most important trade partners of China. For example, China’s imports from South Korea, Vietnam and India increased by 22%, 20% and 29% respectively in the first few months of 2018 as compared to the previous year. This has largely been driven by China’s Belt and Road Initiative (BRI) – a global development strategy adopted by the Chinese government involving infrastructure development and investments in 152 countries and international organizations in Asia, Europe, Africa, the Middle East and the Americas. And this has led to China’s increasing overseas investment, because the main purpose of the BRI is to connect China to the world, and to open up market access for Chinese companies overseas. Specifically, by the end of 2017, China’s non-financial outbound direct investment in BRI countries exceeded one hundred billion US dollars, with BRI countries’ total investments in China also exceeding 27 billion US dollars. Overall, data shows that China’s outward Foreign Direct Investment (FDI) is exploding recently, going up from 6 billion US dollars in 2005 to 183 billion US dollars in 2016, a more than 30 times increase. This has meant that China has become a major FDI exporter globally, with the stock of China’s FDI in other economies now reaching 1.7 trillion US dollars. This has also had huge impacts on China’s neighboring countries, as recently, Chinese FDI in BRI countries increased massively and the stock of Chinese FDI in those countries reached seventy-one billion US dollars by 2017. This is very significant because Chinese investment has replaced the traditional investors in those countries like EU states and has become a powerful driver of economic development in partner countries. For example, data shows that Chinese FDI created a large number of job opportunities and contributed to technology transfers in BRI regions.
2.2 Infrastructure Development Initiatives
Under the “Belt and Road Initiative” (BRI), one of the major infrastructure development initiatives led by China at the present stage, plans to link Southeast Asia, Central Asia, the Gulf region, Africa and Europe to China, with six major economic corridors under its umbrella. This will require building and upgrading road, rail and port and other infrastructure facilities, like special economic zones along the routes, to improve connectivity across a number of countries. The “China – Indochina Peninsula Economic Corridor” is an important part under the BRI. The corridor starts from China’s Yunnan Province, and stretches southward through Lao PDR, Thailand, Malaysia and Singapore before reaching the sea. This will greatly promote regional connectivity and improve the strategic mutual relations of China and relevant Corridor countries.
The economic corridor passes through the north central plain of Thailand. The Thai government has already launched the “Thailand 4.0” strategy and the “Eastern Economic Corridor” development plan, which aims to link with the BRI by taking the advantage of the alignment with the BRI and attract more foreign investments, technologies and know how, the corridor is believed to enhance regional economic growth and competitiveness in the region. With the development of the BRI across the Indochina Peninsula, a series of infrastructure projects, including to improve the existing infrastructure, such as rail and road networks, will be implemented. The development of the BRI and the China-Indochina Peninsula Economic Corridor offers the potential for forming a “Gateway” of ASEAN by linking the Southern Economic Corridor under the Greater Mekong Subregion cooperation and the Pan-Beibu Gulf economic region, which can help promote the economic development in the Indochina Peninsula. Moreover, development such as cross-border economic cooperation and smart city along the corridor is envisaged in the long run. From the point of view of political geography, the strategic mutual relations of China and relevant Corridor countries will be improved, having closer cooperation in terms of policy coordination, connectivity of infrastructure, unimpeded trade, financial integration and closer people-to-people ties. It is believed that the strategic mutual relations can be further enhanced once national development goals and the BRI vision have been aligned to deepen comprehensively and strategic mutual cooperation in various areas. For instance, the political leadership in China and Thailand would envisage joint development in economic and social areas in a long term, because that is the fundamental and stable way to enhance the Sino-Thai relationship. On the other hand, the development of infrastructure for the economic corridors may fail to consider the environmental impacts and to improve local people’s living conditions. Measures like biodiversity offset and comprehensive regional planning should be taken into account and to mitigate environmental impacts so as to strike a balance amongst the conservation of natural and cultural resources and infrastructure development. Also, proposing capacity building and technology transfer measures would enhance the initiative and local community understanding of the projects. However, these will increase complexity and difficulty in implementation and put further strain on the relationship whilst different cross-boundary areas have different governance, legal and policy framework environments. In conclusion, it is evident that the infrastructure development initiatives by China will lead to closer mutual relations and benefits to the relevant corridor countries. But close attention to grass-root level and benefits to local people should be taken under imperatives of sustainable development, and continuous communication and collaboration between different stakeholders should be underpinned.
2.3 Employment Opportunities and Labor Migration
In recent years, several neighbouring countries have experienced labour shortages as their own workers have been attracted by the higher wages offered in China. The Chinese government has become more concerned about demographic factors as the population ages and the One Child Policy has reduced the numbers of young workers. Labour migration has not only been in response to economic incentives but it has also been actively encouraged by the Chinese government. For example, universities have introduced employment guidance for students from the less developed regions in the central and western parts of China, and both the central and provincial governments have established various talent-attracting schemes. Through these schemes and market-oriented wage levels, vast increases in labour migration from the poorer western regions to the industrialised east have occurred. Many young people have gone to the coastal provinces looking for work. For example, the Guangxi Zhuang Autonomous Region has seen rapid growth in labour outflow in recent years. As a result, it has become much easier for the enterprises there to hire employees. In some counties, township governments have even abolished taxes on businesses in order to attract workers. Labor migration in China is largely analogous to rural-to-urban migration in America during the 1920s-1940s when countries were industrialising and modernising. The improved efficiency and rising wages of the manufacturing sector as well as the increased mechanisation of agriculture through agricultural modernisation changes have created job opportunities and attracted labour from the primary sector in the rural west to the secondary sector in the urbanised east. Such migration has boosted not only the quantity but also the quality of population in labour-importing regions. This is likely to enhance the prosperity of these regions and the competitive advantage of migrating workers in the long run because of the various economic, social and human capital resources that the migrants bring with them.
3. Political and Geopolitical Implications
Overall, the paper needs to provide greater detail and topicality under each theme so as to ensure that the arguments presented are cohesive.
I feel that the paper lacks coherence as the content is too thematic. Given that this is an economic module, I would suggest the author to provide more insights on how economics theories may be employed to explain certain phenomena that was alluded in the paper. For example, the paper has argued that China’s growing influence in global platform allows it to have a say in setting rules that will shape global economy. Hence, the author could include in the conclusion that China’s growing role in international organization is a reflection of “Managerialism” theory in economics which claims that MNCs seek for cooperative investment strategies and tends to create international restrictions leisure opportunities. By doing so, the focus on economics will not be lost and the paper will then be coherent comprehensive economic analysis from the beginning to the end.
Second, there has to be a more comprehensive elaboration on how China’s rising economy has shifted regional power dynamics, which is referenced as “3.3 Shifts in Regional Power Dynamics” in the contents. This is however lacking as only one paragraph is dedicated for that. To make the subject of regional power shift more critical on the paper, the author could provide example as to how regional powers such as Japan and India respond to China’s emergence as an economic power. This could be elaborated in the content under “3.3 Shifts in Regional Power Dynamics”. The explanation could include the upgrading of military capability by both countries and how each sought to build better ties with countries in South East Asia. This will in turn reinforce that China growing influence in the region has indeed made neighbours with strong economic base to consider contingency plans and alliance to counter the possible upsets that may arise from irrational economic and regional policies post by China.
First and foremost, the author should have indicated that section “3. Political and Geopolitical Implications” is the focus of the study. Hence, the author has to largely dwell on this topic and provide elaboration to make it the mainstay of the paper.
3.1 China’s Growing Influence in International Organizations
In the recent years, China’s growing influence in international organizations has raised attention to both scholars, policymakers, and the international community. This section will focus on providing a detailed analysis of this and show how China’s expanding roles in current IOs can not only consolidate the legitimacy and authority of these organizations but also reflect many ambitious global strategies of the rising power. Before addressing the main topic, we need to understand why international organizations matter to China. First and foremost, international organizations act as the core instruments of the process of international relations and contemporary world politics. They generally serve as the platform for abiding by modern international law, making major global strategy decisions, and solving various international problems. Meanwhile, the preferences of different member states within an organization can vary significantly according to the composition of the memberships and the internal decision-making policies. Therefore, access to the IOs and the ability to affect IOs are perceived as important means to immediate national goals and great power influence. Last but not least, a fundamental function of international organizations lies in their ability to establish legitimate grounds for common global efforts and multilateral engagements. As China is gaining the second-largest world economy, the largest population, and a series of increasingly ambitious global strategies, having control and influence in international organizations become an important dimension of Xi’s global strategies to serve the Chinese Dream in the international arena.
3.2 Territorial Disputes and Maritime Security Concerns
As a rising power, China is increasingly being seen as a revisionist state that seeks to challenge the existing international order and rewrite the rules in accordance with its own aspirations and authoritarian values. Given the severity of the challenges China’s assertive foreign policy brings to the regional security, the response by the United States and its allies and partners in Asia is critical. It remains uncertain whether China’s rise as a great power will lead to a fundamental reshaping of the regional order, or the existing mechanisms for collective management of security and prosperity in the region will continue to adjust and accommodate the interests and rights of all regional countries.
These disputes pose severe challenges to maritime security. First, the militarization of the territorial disputes has increased the risk of open military confrontation. Second, the disputes have already distracted the efforts to deal with non-traditional security issues, such as natural disasters, marine pollution, and overfishing. Third, the intimidation of fishing and commercial vessels by militarized law enforcement from both sides has raised the possibilities of state-sponsored sabotage and armed conflicts. This has already started to affect the prosperity and well-being of the people whose livelihoods depend on the sea. For instance, the tensions have caused some fishermen from the Philippines to lose their jobs.
In addition to the land reclamation, China has started to build military infrastructure on the disputed islands, such as airbases and port facilities. These provocative actions have prompted concerns over the infringement of freedom of navigation and the military escalation in the region. In response to China’s coastal activities, the US has initiated “freedom of navigation” operations, in which warships and aircraft challenge the excessive maritime claims of littoral states that are inconsistent with international law.
The ongoing territorial disputes between China and its neighbors have been a major source of tension in the region. In the South China Sea, China, Taiwan, Vietnam, the Philippines, and Malaysia have overlapping territorial claims. China claims nearly all of the South China Sea, where more than US$3 trillion of trade passes every year. It has been using extensive land reclamation and the construction of artificial islands to bolster its claims. On several occasions, these actions have sparked strong protests from the United States. However, the infrastructure build-up of these islands also allows China to extend the surface area of its territories and exercise greater control over the exclusive economic zones.
3.3 Shifts in Regional Power Dynamics
One example would be the China-Pakistan Economic Corridor, which is a series of infrastructure projects throughout Pakistan that aim to connect China’s Xinjiang province to the Arabian Sea. This project not only allows China to access new markets in the Middle East and Africa without having to send its goods through the South China Sea, it also leads to closer economic ties between Pakistan and China. Moreover, China’s regional power and influence, particularly in South Asia, present a counterbalance to India, which has long been perceived by the West as a natural ally in the region. This is a clear example of a strategic initiative that serves both China’s economic interests and regional expansion. Another significant sign of shifts in regional power dynamics is the founding of the Asian Infrastructure Investment Bank (AIIB) by China in 2015. The AIIB, with 57 founding members and a mission to boost economic growth in Asia by investing in infrastructure and other productive sectors, is seen by many as a direct challenge to existing international financial institutions such as the World Bank and the International Monetary Fund that are dominated by the US and its allies. Although China looks to benefit from new institutions like the AIIB by having a stronger role in decision making and priority setting, the US has shown open disdain for these rival organizations and tried to dissuade its own allies such as Australia from joining it. As a consequence, new fault lines between the US and its allies and China have started to emerge, transforming the international political landscape across the entire Asia-Pacific region. All these examples, plus various other trade and infrastructure projects being pursued by China and its partners in different parts of Asia, give us a glimpse into the complexity and diversity of China’s economic and political strategies in its rise to a newfound regional and global status. These examples not only serve to illustrate the previous discussions on how the economic rise of China has led to shifts in regional power imbalances, but also show the multifaceted ways in which China seeks to consolidate its position as a top regional power while potentially challenging the dominance of the US in the larger global system.
4. Socio-cultural and Environmental Effects
According to a study conducted by Professor Jiaotong Zhang in the University of Adelaide, Australia, and his fellow researcher and doctoral candidate Jianqiang Liu, the Chinese government’s disneyfication (plan and realization). As a matter of fact, from 2001 to 2011 China’s tourism industry had sustained an average annual growth rate at 15.2%. Through the interactions between the research team and the curators in the ethnical theme parks, it is suggested that cultural symbolisms of each ethnic culture are being simplified and “Han-ified” in the theme park setting, hence causing tensions and possible social resistance amongst local non-Han inhabitants and ethnic minority groups. The simulated culture, often a wider range of entertainment programs as well as the folkloric displays and activities tailored to tourists’ expectations, is in essence a “dumbed-down” commodification of such cultures and bear little relevance to the everyday lives of the people in that culture. Professor Zhang highlighted that cultural theme parks in ethnical areas suffer from a paradox: they were constructed for the purpose of industrial-led tourism development and governmental promotion on ‘ethnic unity through theme park management,’ yet ironically, the fabrication of cultures for tourism has led to a form of cultural humiliation and self-estrangement for the local non-Han and ethnic communities.
The Chinese government created the Office of the National Leading Group for the Development of Western China in 1999, and in 2001 China’s 10th Five-Year Plan also started to outline social and cultural development strategies of the country. The Chinese state apparatus applies government discourses such as “economic growth,” “social harmony,” “minority unity,” and “cultural development” to emphasize the CPC’s legitimacy, stability of the country, and the socialist belief, if not faith, in progress. With the “Great Western Development” strategy implemented, there emerged a series of phenomenal investment in large-scale infrastructure projects in Western China. Rich in natural resources and culturally diverse, Western China is often labeled a region filled with “backwardness” and “undevelopment” under the context of “opening up the West to the outside world” in China.
4.1 Cultural Exchanges and Soft Power Projection
Chinese culture is one of the world’s oldest cultures, originating thousands of years ago. The area in which the culture is dominant covers a large geographical region in eastern Asia with customs and traditions varying greatly between provinces, cities, and even towns as well. One important aspect of China’s expanding global influence is the growth of cultural and social influence of the Chinese state. At the same time as the PRC has sought to strengthen its cultural and ideological influence internationally, it has also sought to guard against Western ideology and values. One of the key ways in which China’s growing global influence can be seen is through ‘soft power’, a term coined by American political scientist Joseph Nye in the late 1980s. It is the ability of a country to shape the preferences of others, creating an admiration or respect that gives the country a sense of cultural authority. China made a concerted effort to improve its cultural soft power internationally in November 2007 with the establishment of the Confucius Institute. These are public educational organizations affiliated with the Ministry of Education of the People’s Republic of China, whose stated aim is to promote Chinese language and culture, support local Chinese teaching internationally, and facilitate cultural exchanges. However, the increasing importance of the role of the Chinese language as a form of cultural influence and the development of an infrastructure to support this unequivocally places China’s efforts in this field within the context of growing soft power. This approach to the globalization of Chinese language indicates attempts by the Chinese state to influence opinions and preferences and thus the fabric of another society. While the growth of China’s soft power and closeness to a public of another state are largely academic debates, determinations should rest on empirical backing rather than political debate. As such, evidence of mutual understandings, increased social progress as well as a more equal and balanced inter-relationship amongst these countries and also perhaps a shift in global political and economic dominance are needed to suggest that the current wave of popular academic discourse arguing for China’s soft power dominance has weight.
4.2 Environmental Challenges and Sustainability Issues
The environmental aspect of China’s economic ascendance is an important area for study. The environmental consciousness of the Chinese regime and how it seeks to balance the need for sustained economic growth with the conservation and protection of the natural environment have been of great interest to the international community, especially considering the significant implications that China’s environmental policies could have on a global scale, in light of China’s upcoming position as a major world power. With reference to the environmental Kuznets curve, which posits that initially, economic growth tends to lead to environmental degradation, but that it begins to facilitate environmental improvement after a certain income level is reached, the idea that China’s period of rapid growth can be expected to have large environmental costs is underlined. The concept of a ‘green’ GDP seeks to account for the environmental consequences of economic growth. Although officially recognised as important by the Chinese government over a decade ago, the main idea behind this political rhetoric is to improve and give legitimacy to the government’s efforts on environmental protection. This is important to maintain social stability and to maintain the long-term, sustainable economic growth, with the public increasingly concerned about the environmental issues that have emerged. Environmental deterioration has a direct impact on the people of China, and the power of the internet and social media means that information is increasingly difficult to control and rhetoric is not enough to prevent public unrest. It represents progress in that there has been a shift in interpretation of what it means to be ‘developed’, with growing recognition that balance with nature is just as important as material wealth. The continued promotion of the green GDP is a good indicator of genuine commitment from the government to addressing and mitigating the harmful environmental impacts of Chinese industry. However, the effectiveness of this is yet to be seen in substantial improvement. Do you think everyone is responsible for environmental conservation?