China’s Rise and Its Impacts

“Do everything what you want, do everything whatever you see, do whatever is
objective oriented and do whatever is magnificent: modernization,
macdonaldization, do whatever suits you but with Chinese Characteristics”
Reforms of China 1 and 2, an Economic Superpower by Xi Xijping

 The rate of China’s industrial growth is unmatched in history. Within a

few decades after initiating widespread economic reforms, China
emerged as an economic superpower. The largely agrarian economy
transitioned into an advanced economy with the expansion of its
manufacturing and services sector. China’s industrial growth strategy
paved the way for the country to become the largest manufacturer.
 Due to its industrial prowess, it began to be called the ‘‘world’s factory’’.
In the early years of the People’s Republic of China, the economy was
largely agriculturally based. Due to its policies, it had very limited
linkages with the outer world. The economic progress was sluggish and
devastating as millions of Chinese faced extreme poverty. In 1978,
China’s GDP was $149.54 billion and its share in the global economy
was only 1.75 percent. For a country of 956 million people, the size of the
economy was way too low.
 In comparison, the United States at that time had a population of 222.6
million but its GDP amounted to $2.35 trillion. From 1978 onwards,
China made a remarkable transformation and its economy expanded
manifolds. Small towns and port cities turned into industrial hubs, and
demand for Chinese products grew exponentially across the globe.

China’s Growth Model:

1. Deng’s framework: Bottom Up Approach
 Utilized large workforce
 He gave farming land in private control as these farmers who were
appointed on wage system had to only pay taxes to the Government
and famine facing China became food surplus land
 Motivated farm owners to invest in commercial crops such as
sugarcane and cotton
 Township and Village Enterprises: Den Xioping focused was:
 Deng Promoted Township and Village enterprises TVEs so that
surplus labor of agriculture to be shifted to low skill manufacturing
industry such as toys, furniture, fertilizers and farm tools. These
TVEs contributed 13% of the GDP in 1985 and became 30% in
 1990 and created more than 20 million jobs (University of
Wollengon Research)
 Textile Revolution: Commercialization in agriculture boosted
cash crop and became largest producer in 1990. Locally available
cheap labor and cheap cotton attracted foreign investors as a result
growth rate of textile was 95% in 1990 through Open door policy,
china started selling her cheap textile to the world
 Skilling of Labor Force: 9 years of schooling education was made
compulsory along with vocational training. For Technical
education, technical and Vocation educational systems were
introduced. Until 1990, primary education all over China became
prevalent and it introduced 9.5 lac graduates
 Shift to Electronics: South Korea and Japan’s products like TV,
Fridge and Radio etc expanded but they had no land to expand
their business nor did they have labor force which China utilized.
Local entrepreneurs utilized the available tech for these companies
and setup their own factories of TV, VCR and Cassettes. Moreover
china utilized Special economic zones to attract foreign investors,
which included high speed railways, infrastructure and highways
 Shenzen Factory hub of China: Chinese silicon valley, Foxconn
of Vietnam
 Cheap labor of China: for Apple, Del and HP now china was in
better bargaining position
 Conditional Foreign Investments: where china demanded foreign
companies to tie up technological information to state owned
investors
 Copy cat Culture:
 Service Industry: It led Tech industries have 54% gdp share
 5G and AI boom: China is the major source of cellular network
equipment used in 5G
Implications of China’s Rise on the Globe
1. Trade War between US and China
2. Politics in South China Sea
3. Increasing partnership in European Union: AUKUS
4. Neoliberal internationalism was violated
5. Regionalization in the form of RECP (Far East 14 countries formed it)
6. Indian withdrawal from non-alignment
7. Rising tech nationalism
 US-China Trade War
An economic conflict between China and the United States has been ongoing
since January 2018, when U.S. President Donald Trump began setting tariffs
and other trade barriers on China with the goal of forcing it to make changes to
what the U.S. says are longstanding unfair trade practices and intellectual
property theft. The Trump administration stated that these practices may
contribute to the U.S.–China trade deficit, and that the Chinese government
requires transfer of American technology to China. In response to US trade
measures, the Chinese government accused the Trump administration of
engaging in nationalist protectionism and took retaliatory action. After the trade
war escalated through 2019, in January 2020 the two sides reached a tense
phase one agreement; it expired in December 2021 with China failing by a wide
margin to reach its targets for U.S. imports to China. By the end of the Trump
presidency, the trade war was met with some criticism. His successor, Joe
Biden, however, has kept the tariffs in place.
Background of Trade between US and China
The volume of trade in goods between the US and China has grown rapidly
since the beginning of China’s economic reforms in the late 1970s. The growth
of trade accelerated after China’s entry into the World Trade
Organization (WTO) in 2001, with the US and China becoming one another’s
most important trading partners.
The trade war started due to following facts:
1. Unfair Practices: China offers inflexible trade exchange rates and for the
sake of competitive advantage China uses devaluation of her local
currency every now and then (to enhance the export of its products).
During the Obama administration, the US additionally accused China of
subsidizing aluminium and steel production, and initiated a range of anti-
dumping investigations against China
Former White House Counsel, Jim Schultz, said that “through multiple
presidential administrations — Clinton, Bush and Obama — the United States
has naively looked the other way while China cheated its way to an unfair
advantage in the international trade market”
2. Intellectual Property Theft: trade corporate secrets, working
methodology and ponsored of American companies were stolen.
Moreover China had a policy that whenever an any investor has to invest
 in china it has to invest alongwith China’s state partner particulary
includes defence sector
3. Trade Deficit: The US has consistently imported more from China than
it has exported to China, with the bilateral US trade deficit in goods with
China rising to $375.6 billion in 2017. This trade deficit is driven by a
difference in saving rates between the US and China: Chinese households
save more than 30 percent of disposable income on average, compared to
7 percent in the United States.
4. Vulture Capitalism: Chinese state ponsored companies invested in the
various start up companies in America and Europe, which they used to
purchase and hold that company’s shares
China’s Narrative on US-China Trade War
1. America wants to curb China’s stifling growth: As China’s economy
was growing at a rate of 7%. The Chinese government has blamed the
American government for starting the conflict and said that US actions
were making negotiations difficult.
2. America’s presumption of guilt: whenever America comes to negotiate
on trade agreements it adopts presumption of guilt. Zhang Xiangchen,
China’s ambassador to the World Trade Organization, said the U.S. Trade
Representative was operating with a “presumption of guilt”, making
claims without evidence and based on speculation.
3. The Chinese government has denied forced transfer of IP is a
mandatory practice, and acknowledged the impact of domestic R&D
performed in China. Former U.S. treasury secretary Larry
Summers assessed that Chinese leadership in some technological fields
was the result of “huge government investment in basic science” and not
“theft” of U.S. properties
Methods of Competition
1. Defensive:
 America imposed $360bn tariffs as a result China imposed $110
billion tariffs on America
 America imposed 25% additional duty charges as a result China
imposed 15% additional duty charges
 The administrations of George W. Bush and Barack Obama
imposed quotas and tariffs on Chinese textiles in order to shield US
domestic producers, accusing China of exporting these products
at dumping prices
  The Biden administration had not withdrawn Trump-era tariffs on
Chinese imports, as of September 2022. In fact, the Democratic
administration has introduced a number of new export limits and
US investment bans for Chinese companies to protect US
economic and military interests. In October 2022, the US
Department of Commerce expanded sanctions after implicating 50
Chinese companies, including telecoms equipment
maker Huawei in June 2021.
2. Offensive
 Foreign investment Bill by America as no vulture capitalism
allowed in the sectors like defence and technology
 China brought changes in foreign investment law as the
requirement of investment with a state ponsored investor was eased
out
Phase 1 Deal:
1. To strengthen policies against intellectual property theft
2. China has to do $200bn imports from USA to balance trade deficit
3. America will reduce tariffs by half
Implications
1. Shifting of supply chain
2. US-China economic decoupling: theory of interdependence violated
according to which two countries do not go into war if they are
interdependent on each other
3. China’s change in economic policies
4. Growth of economic industry in America; steel
5. Increasing costs on consumers
6. Agriculture of US was targeted: Toffler’s concept (in his book war and
anti-war) second wave VS first wave of War, “when agriculture is
targeted in a country it becomes very easy to successfully cause
disruption there as agriculture is the biggest employer of labor for” As
china was the biggest importer of America’s wheat and because of Tariffs
China did not imported American wheat, caused a disruption in supply
chain and prices of wheat fell due to which government had to give
subsidies
7. Semiconductor and Rare Earth Metals Conflict: America manufactures
semiconductors whereas china contains those rare earth metal required to
form semiconductor chips. They both halted their exports to each other
8. Second Cold war and Formation of alliances such as QUAD
 9. USA threatened to leave WTO
10.Chinese domestication policy (under Vision 2025): instead of selling
goods and services to outside world China will focus on the domestic
consumption
11.5G and Digital Competition:
12.America withdrew from Trans Pacific Partnership: due to free trade
agreements the domestic jobs of America is going to other countries
13.Weaponization through digital currency: (Vchat,Alipay and Alipay) to
break the stranglehold of USA in the World
Impacts for Pakistan:
1. Pakistan’s bipartisanship difficult to balance: $3.51bn from USA to Pak,
from Pak to USA $5.51Bn whereas China to Pak is $3.25bn and Pak to
China $23.5bn
2. United States Maxican Canadian Agreement (UNMCA)/NAFTA 2.0:
Chinese imports will not be included in free trade Pakistan has to be
directly impacted
3. CPEC faces threats due to Quad, AUKUS and such agreements
Politics in South China Sea