Propagation of the Effects of China’s Changing Economic Development Model to the Rest of the World

Marina Soloviova

doi:10.53486/econ.2021.115.096

Abstract

This paper tackles the potential effects of the fundamental changes that China’s economy is undergoing on the rest of the world. Thus, a range of effects in the development of China’s imports of goods and services can have on other countries were identified, in terms of China’s switching from investment to consumption and from manufacturing to services and innovations, as well as in exports, in the light of China’s upward movement within the global value chain. The spread of effects via the financial channel is examined for direct investment and external loans, with an emphasis on changes in both the size of financial flows and the motivation of Chinese investors. The emerging trend of relative reduction in China’s foreign exchange reserves, as well as the potential effects of the yuan’s internationalization going forward in terms of diminishing global current account imbalances were evaluated.

Highlights

The People’s Republic of China ranks the second largest economy in the world after the USA, with a GDP of around USD14 trillion (2019)
The spread of effects via the financial channel is examined for direct investment and external loans, with an emphasis on changes in both the size of financial flows and the motivation of Chinese investors
Since China’s economic growth relies excessively on exports and domestic investment in housing and infrastructure development, the aim that the government of the PRC is currently pursuing is boosting domestic consumption demand, so that it becomes the main engine of economic growth [2];

Summary

ECONOMICĂ A CHINEI ÎN RESTUL LUMII

Prezentul articol abordează efectele potenţiale ale schimbărilor fundamentale, prin care trece economia Chinei, asupra restului lumii. Au fost identificate mai multe efecte ale evoluţiei importurilor de bunuri şi servicii din perspectiva reorientării ei de la investiţii la consum şi de la industrie la servicii şi inovaţii, precum şi a exporturilor Chinei, în contextul mişcării ei ascendente în cadrul lanţului valoric global. PROPAGATION OF THE EFFECTS OF CHINA’S CHANGING ECONOMIC DEVELOPMENT MODEL TO THE REST OF THE WORLD. This paper tackles the potential effects of the fundamental changes that China’s economy is undergoing on the rest of the world. The spread of effects via the financial channel is examined for direct investment and external loans, with an emphasis on changes in both the size of financial flows and the motivation of Chinese investors.

Introduction

Results and discussions

Developing countries

Conclusions