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Globalization and China's Scientific Development
2009-10-26
By Xia Bin, Research Institute of Finance, the DRC
Research Report No 65, 2009
I. China's Status in Economic Globalization
Chinese and foreign scholars hold different views of analyses related to globalization. Some have based their analyses on two different stages, while others have based theirs on three stages. The three-stage approach refers to years from 1500～1800, years from 1800～1913 and years from 1950 till now. The two-stage approach refers to years from 1870 to 1913 and years after 1950. Today, I am basing my analysis on the two-stage approach to highlight what happened after the Industrial Revolution.
First of all, it should be pointed out that globalization is beneficial for mankind. From 1500 to 1820, the world economy grew by only 0.3% on an average. During the first globalization between 1870 and 1913, the world GDP grew by 2.11% on the average; during the second globalization between 1950 and 1998, the world GDP grew faster to 3.9%. The global real per-capital income increased by an average of 0.05% between 1500 and 1820, 1.3% between 1870 and 1913 and 2.1% between 1950 and 1998. Thus it can be seen that globalization is quite beneficial for mankind.
Then what status did China have in the globalization that happened during the two stages? In the first globalization process, China was an outcast. Before the first globalization, namely, during the agricultural society, the proportion of China's GDP in the global total was as high as 33% or so in 1820, being nearly 30% more than the GDP of the West European countries plus Australia, New Zealand, Canada and the United States put together. China was then having a most glorious period in history. However, during the latter period of the previous globalization, or before the outbreak of World War I in 1913, the proportion of China's GDP in the global total dropped to 6.8% in 1900. In the second globalization, China was an important facilitator and beneficiary. In the current globalization, since 1950, the proportion of China's GDP increased from 1.7% in 1978 to 6% in 2007, a fifteen-fold increase over 30 years' time (at constant price), up 9.8% annually. The proportion of China's trade volume in the world total rose from 0.8% in 1978 to 7.7% in 2007, growing by 104 times over 30 years' time, up an annual average of 17.4%.
II. As Long As the Globalization Trend Goes on, China Will Still Be an Important Beneficiary
Why did the first globalization break off? It was mainly because the then major countries vied with each other for interests and their conflicts in contesting colonies resulted in a war, thus putting an end to the globalization. In view of the present globalization trend, there is still much room for China to embrace the globalization. Why? The question can be answered with the trade volume (exports) proportions occupied by the major trading countries in the world total in different stages. In 1870, Britain was a key country during the first globalization, with its exports accounting for 18.9% of the world total. In 1950, the United States, with its economy highly developed, had its exports constitute 16.8% of the world total. If Britain got the lion's share from last globalization, the United States has played the part of the bellwether in present globalization. Although China has a big surplus today, the proportion of its exports in the world total accounted only for 7.8% in 2007, lower than 9.4% of the United States and 8.9% of Germany. It suggests that China's export proportion is far less than that of Britain in the first globalization and lower than that of the United States during the second globalization. Moreover, in terms of China's development at present stage, it is all the more urgent for China to get further integrated with globalization. The reason is that China is now a "world manufacturer" or a big producing country at present phase of economic development. China's service sector is poorly developed and makes little money. What's more, the internal and external contradictions related to China's present economic development have made it impossible for China to rely on export-oriented growth pattern. China is rising with scarcity of resources whereas the world resources are all in short supply. As a result, China, while enhancing the people's consumption and social welfare, is in need of considerable oil supplies, mineral resources, technologies as well as financial resources from across the world. Therefore, it is much urgent for us to participate in globalization.
Then, what factors can determine that China will still be a beneficiary as long as globalization trend goes on? Firstly, the turning point related to China's population growth has not completely arrived and the advantage of cheap laborers in great number can remain for a certain period of time. Even if the turning point related to population growth arrives, there may still be differences from the United States and Japan. Secondly, high savings will be able to continue for rather a long period of time. Thirdly, China is a consumer market with 1.3 billion people. Fourthly, China has much room for its urbanization and industrialization. Fifthly, China needs to further its reform, which means a further release and improvement of productive forces. Therefore, based on these scenarios, China will surely be a winner as long as it adheres to the principle of making co-operation with foreign countries for mutual gain and safeguards the globalization trend by making relevant compromises on certain points.
On the other hand, although trade protectionism is rearing an ugly head, globalization is not let up. Besides, each globalization usually needs to be facilitated by the key countries. Now the key country is the United States. The United States will not simply stop the globalization trend when it carries out its "US-dominated" strategy. Hence, as long as the United States is still driving forward globalization, China will benefit from it. Virtually, the present American financial crisis resulted from the American labor productivity which had been unable to prop up the high growth in the preceding years. Therefore, at present we should not expect that the United States could get rid of the crisis very soon, because if it were really so, the United States would issue a large number of currencies that could pose a hidden peril for the future.
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