At a time when the risks of international engagement are more obvious than ever, China faces important questions about whether – and to what extent – it should continue to pursue opening up its economy to the rest of the world. At stake may be some $22-37 trillion in economic value – or 15-26% of world GDP – by 2040.
SHANGHAI – Over nearly 40 years of economic reform, China has reaped extraordinary rewards from opening up to the world. Integration into the global economy – albeit a supporting element of the country’s broader historic turn to the market mechanism – has enabled millions of China’s citizens to escape poverty, while transforming China into the world’s largest economy in purchasing power parity terms. And the potential of such engagement is far from depleted, our new research shows.
For example, while China commands 11% of global merchandise trade, it accounts for only 6% of global trade in services. Moreover, while China’s banking, securities, and bond markets all rank among the world’s top three in size, foreign entities account for less than 6% of their value. And though China has 110 Global Fortune 500 companies, less than one-fifth of their revenue is earned overseas, compared to 44% for S&P 500 firms.
Even before today’s trade tensions, the relationship between China and the world had been changing. China’s relative exposure to the rest of the world – in terms of trade, technology, and capital – peaked in 2007, and has been declining ever since, producing an overall decline from 2000 to 2017. This partly reflects the economy’s growing emphasis on domestic consumption – a trend that accelerated after the global financial crisis sharply reduced foreign demand for China’s exports.
SHANGHAI – Over nearly 40 years of economic reform, China has reaped extraordinary rewards from opening up to the world. Integration into the global economy – albeit a supporting element of the country’s broader historic turn to the market mechanism – has enabled millions of China’s citizens to escape poverty, while transforming China into the world’s largest economy in purchasing power parity terms. And the potential of such engagement is far from depleted, our new research shows.
For example, while China commands 11% of global merchandise trade, it accounts for only 6% of global trade in services. Moreover, while China’s banking, securities, and bond markets all rank among the world’s top three in size, foreign entities account for less than 6% of their value. And though China has 110 Global Fortune 500 companies, less than one-fifth of their revenue is earned overseas, compared to 44% for S&P 500 firms.
Even before today’s trade tensions, the relationship between China and the world had been changing. China’s relative exposure to the rest of the world – in terms of trade, technology, and capital – peaked in 2007, and has been declining ever since, producing an overall decline from 2000 to 2017. This partly reflects the economy’s growing emphasis on domestic consumption – a trend that accelerated after the global financial crisis sharply reduced foreign demand for China’s exports.