Chinese geoeconomic strategy

about growth, exports and investments, the story of the next decade will be about the creation of a Chinese economic and political order.
Even as the growth of Beijing’s economy slows, China is becoming part of the fabric of the economic life of most countries around the world. Rather than trying to overthrow existing institutions as many had feared, Beijing is instead using this economic might to link up to the rest of the world and develop a series of relationships and institutions which result in a more China-centric world order. This new economic and political order is structured differently from western-led multilateral institutions which are underpinned by treaties, international law and the pooling of sovereignty.

that link it to different capitals, sometimes organised around regional summits. This geo-economic project, more even than its economic rise, is the real revival of the Middle Kingdom. Just as all roads led to Rome, Beijing is building a wide-ranging set of pipelines, bridges, railways, shipping routes and cables that lead to China. By making itself central to every region, China gains leverage and persuasiveness. China’s objectives include promoting trade and investment, productivity and finding ways to export its surplus capacity. But the effect will be to make China the core of the wider economic and geopolitical system, with countries that are not well-connected to the core becoming peripheral. The speed with which this order is coming into being is almost as breathtaking as the emergence of China’s economy, but there is no “grand plan” and its establishment has been both incremental and flexible.

and Parag Khanna describe here in detail: trade, investment, finance, the internationalization of the Chinese currency and China’s infrastructure alliances, most prominently the One Belt, One Road initiative. Because China’s economic rise has been so dramatic, its instruments have the potential to change the economies of different regions and overshadow the Bretton Woods Institutions.
China is the world’s largest exporter, with export goods worth a staggering $2.3 trillion in 2014. It has the world’s fastest growing consumer market. China has gone from being a source of cheap imports to a major source of investment, investing over $160 billion between January 2009 and December 2013 alone. Beijing claims its ‘One Belt, One Road’ initiative will create $2.5 trillion of additional trade for 65 countries. And the AIIB budget is the size of the post-Second World War Marshall Plan for Europe.

in the medium term as structural adjustments and policy efforts to address the accumulated financial vulnerabilities continue. China’s growth has gradually slowed since 2012, signalling what President Xi Jinping has called the “new normal.”8 At 7.7% in 2013 and 7.3% in 2014, growth has fallen from the 10% annual growth rate that China has averaged for three consecutive decades. Since the outset of the global financial crisis in 2008, China has been the largest contributor to world growth and even its projected slower growth remains impressive by current global standards.In the short term, the growth slowdown reflects policies to slow rapid credit growth, contain shadow banking, limit borrowing by local governments and reduce excess capacity in industry. These policies aim at addressing vulnerabilities resulting from the large stimulus package implemented to cushion the effects of the 2008 global financial crisis, which rapidly increased debt levels in the economy.

shift in China’s growth model. As China has long recognized, its growth pattern, based on energy- and resource-intensive investment, manufacturing and exports, has led to economic, environmental and social imbalances that have accumulated over time. Reducing these imbalances requires shifts in the economy from manufacturing to services, from investment to consumption, and from exports to domestic spending. Inducing these shifts is likely to further slow growth in the short term.
China rebalancing. There are signs of this shift towards a more sustainable economic structure. In 2012, services overtook manufacturing as the largest contributor to growth, a sign of a development towards a more developed economy. By 2014, the share of the services sector in GDP was 48%, exceeding the share of industry by five points.

there are signs of rebalancing; in most recent years, consumption grew slightly faster than investment. External rebalancing has been more rapid, with the current account surplus shrinking from almost 10% of GDP in 2007 to about 2% of GDP in 2014. China’s increasingly sophisticated export structure, shift to higher value production, rising R&D spending and growing number of patents awarded domestically and abroad suggest further progress towards a new growth model.

been gradual, but rebalancing from industrial sector to services has been proceeding rapidly.