The Rise of China : How Global Infrastructure Connectivity Important to China

Author : Ria Fatmasari, Staff of DG of Budget Financing and Risk Management **)

China has undergone quite massive economic reform since 1970s. Gaige Kaifang (reform and opening-up policy), economic reform initiated by Deng Xiaoping became the momentum of gradual shifting from purely socialist economy to what it is claimed as “socialism with Chinese characteristic”. Since this reform, China has experienced remarkable economic growth among other Asian countries, which shown the highest GDP growth reached more than 15% in 1984 and the lowest 3,8% in 1990.

Globalization and free trade has brought vast opportunities to expand market and investment. China has succesfully utilize this opportunity to increase its economic expansion and leverage. On the other hand, China should encounter related domestic issues such as severe air pollution and slow economic growth in recent years (around 6-7%). This issues also becomes important factor to understand China’s economic policy for promoting foreign investment outflow as well as export expansion.

The economic growth has been mostly contributed by promising development in industrial sector which supported by cheap and large human resources as competitive advantage. China was well-known with its imitation strategy in the early stage of industrialization, and has succesfully developed innovation in various products, including clothing, electronic, and communication device, from low-end to high-end. Chinese products now ready to dominate the global market. Even the top export destinations of China today are among its greatest competitors, which comprising of the United States, Hong Kong, Japan, South Korea, and Germany.

China is now keeping its pace for global expansion, not only through export but also foreign direct investment (FDI). In 1990 China produced only less than 3% of global manufacturing, but now the share continue to grow. Despite remains low compared to other developed countries in terms of FDI, the FDI outflows also significantly increase. According to World Investment Report 2017 released by UNCTAD, China becomes the most  promising  source  of  FDI,  followed by the United States, Germany and the United Kingdom. China’s FDI outflows in 2016 was 44% increased over previous year, which brought this country as the second largest in the world.

The economic prospect is also followed by high-profile policy in terms of geopolitics and international relations. China has continued to engage on a bigger role in the global political economy, for instance through economic alliance : ASEAN+3 and BRICS, along with Brazil, Russia, India, and South Africa. China also engages in the leadership of several international forums. In 2016 China took presidency in G20 before replaced by Germany this year. China also took leading role in the establishment and management of Asian Infrastructure Investment Bank (AIIB).

 

*) Please find the full version on the attachment below.

**) The article is based on personal opinion and does not represent MOF policy.

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The Rise of China, How Global Infrastructure Connectivity Important to China

Posted by Dit. PRKN on Nov 30,2017 14:29:47