Uri Dadush and William Shaw of the Carnegie Endowment for International Peace write about the impact that China’s rising economic power will have on the global economic order:
China’s opening to the international economy has driven an astonishing growth rate of 10 percent per year over the past three decades. Going forward, integration with foreign markets will remain a linchpin of China’s continued development, underlining the importance to the country of the agreements and institutions that help to manage globalization. But the transformation of China, along with other emerging markets, into economic powerhouses will fundamentally alter China’s relationship with the global economy and require far-reaching changes in the institutional architecture that has supported global growth since World War II, as well as in the way China perceives its role in them.
In Juggernaut: How Emerging Markets are Reshaping Globalization, we predict that over the next few decades China, India, Brazil, Russia and other emerging markets will come to dominate the global economy. China’s growth will slow to about half of its current, blistering pace, as an aging population and the slowing absorption of rural workers into urban centers will reduce the rate of labor force increases in the modern sector, while as China’s productivity rises the gains from absorbing foreign technology will also slow, although by no means disappear. Nevertheless, China’s annual growth will continue to exceed 5 percent, or two and a half times the average growth rate of the advanced countries. In little more than a generation China will become the largest economy in the world. Extreme poverty, defined by the World Bank as an income of less than $1.25 a day, will virtually disappear, while perhaps a billion Chinese will enjoy incomes that will enable them to buy the modern goods and services that advanced country consumers take for granted. With the benefit of “backwardness,” in the space of 70 years from its opening to the world, China will have achieved what northern Europe needed more than two centuries to accomplish.
Tensions and Challenges
But this rapid progress is far from assured. The rise of China and other emerging markets as major global players arouses tensions and also challenges the established powers, and could lead to economic conflict or worse.