China’s Rise in a Shifting World Economy: Divergence Between the East Asian and Global Views

Shiraishi Takashi [Profile]

[2014.01.20] Read in: 日本語 | 简体字 | 繁體字 | FRANÇAIS | ESPAÑOL | العربية | Русский |

Happy New Year from Nippon.com. We look forward to your readership over the year to come.

The Shifting Shares of the Global Economy: Two Perspectives

As we start 2014, I would like to write about some major long-term developments, namely, the ongoing shift in the world economy and the rise of China. First I would ask you to look at the table below, which presents the changing shares of some major countries and groups of countries in the world economy from 1990 to 2018 (projected) based on figures from the International Monetary Fund.

Shares of the Global Economy, 1990–2018

(%)

1990 2000 2010 2018 (projected)
Advanced economies 80.0 79.9 65.7 58.5
Major advanced economies (G7) 65.4 66.0 50.5 44.7
United States 26.7 31.4 23.4 22.2
Japan 13.9 14.5 8.6 6.1
European Union 31.5 26.1 25.6 22.1
Emerging market and developing economies 20.0 20.1 34.3 41.5
Developing Asia 4.8 6.8 14.9 20.4
China 1.7 3.7 9.3 14.2
ASEAN-5 1.3 1.5 2.5 3.0
India 1.5 1.5 2.7 2.6

Source: Calculated on the basis of the figures for nominal gross domestic product (in US dollars) from the International Monetary Fund’s World Economic Outlook Database (October 2013).

The figures in this table can of course be viewed from various different angles. For example, one can focus on the rise of Asia’s position in the world economy as seen in the growth of “developing Asia’s” share of the total from 4.8% in 1990 to 6.8% in 2000, 14.9% in 2010, and a projected figure of 20.4% in 2018. One can also note the relative decline of Japan’s economic might, with its share edging up from 13.9% in 1990 to 14.5% in 2000 but then falling sharply to 8.6% in 2010 and to a projected 6.1% in 2018. But to judge from the tenor of commentary in recent years, two perspectives seem to be the most commonly adopted.

One is the decline of the major advanced economies relative to the emerging market and developing economies. The global share of the former, consisting of the members of the Group of Seven (Britain, Canada, France, Germany, Italy, Japan, and the United States), which was 65.4% in 1990 and 66.0% in 2000, has since fallen to 50.5% in 2010 and is seen as dipping to 44.7% in 2018. Meanwhile, the share of the latter went from 20.0% in 1990 and 20.1% in 2000 to 34.3% in 2010 and is projected to rise to 41.5% in 2018. Observers who focus on this shift seek to determine how it is changing the world’s political and economic order.

This is the perspective that has informed expositions of the BRICs (Brazil, Russia, India, and China), an acronym that has gained wide currency over the past decades, and of the G-Zero world, a concept advanced by Ian Bremmer (president of the Eurasia Group, a US-based research and consulting firm). Since last year the growth of the emerging economies has not been so dynamic, but even so their rise can be expected to continue, and it seems likely that their share of the world economy will top that of the G7 and that the developing economies’ share will match that of the advanced economies by sometime in the 2020s. In this connection, the construction of a new system of global governance in response to the rise of the emerging economies will be a major issue for the world in the years to come.

The second common perspective focuses on the contrast between the gradually declining share of the United States—from 31.4% in 2000 to 23.4% in 2010 and a projected 22.2% in 2018—and the rapidly rising share of China—1.7% in 1990, 3.7% in 2000, 9.3% in 2010, and a projected 14.2% in 2018. Back in the 1970s Zhou Enlai reportedly said to Henry Kissinger in reference to Japan that economic expansion inevitably leads to expansion of the military.(*1) If in the years ahead China continues to pursue a combination of economic growth, increased military capabilities, and expansion of its political influence, during the 2020s its power can be expected to reach a level matching that of the United States.

Views on the degree to which this shift represents a serious threat differ depending on the observer’s location. In East Asia, naturally enough, a sense of apprehension at China’s rise has been gradually increasing. China’s share of the East Asian economy (consisting of Japan, South Korea, China, the 10 members of the Association of Southeast Asian Nations, and India) had already reached 38% in 2010 and is projected to rise to 51% in 2018. The size of a country’s gross domestic product is not the only determinant of its national power, but given the fact that China will soon account for half of East Asia’s economy, it is no wonder that observers in this part of the world are concerned about China’s rise and that dealing with it is a more important issue on the region’s political and economic agenda than is the rise of the emerging economies.

This, however, holds true only here in East Asia. On the global level, it seems likely that the emerging economies’ rise will continue to attract more attention as an issue relating to the shape of the international order for some time to come. The divergence between the East Asian and global viewpoints can be expected to narrow eventually, but probably not until sometime in the 2020s.

Responding to China’s Rise

After World War II, which brought about the final collapse of nineteenth-century civilization (to borrow Karl Polanyi’s term), the United States rebuilt twentieth-century civilization under its own leadership. Unlike the earlier civilization, which had been built on the balance-of-power system, the international gold standard, self-regulating market economies, and liberal states, the new civilization was built on the Pax Americana, the dollar standard, market economies, and liberal democratic states.

China, after adopting its policies of reform and opening up in 1978, shifted from its socialist command economy to a socialist market economy while maintaining its political system of one-party rule. On the international level it participated in the US-led twentieth-century system, accepting the Pax Americana and the dollar standard. And over the years, while following Deng Xiaoping’s maxim “Hide your strength, bide your time,” it achieved dramatic economic growth, strengthened its military capabilities, and expanded its political influence.

As long as China’s share of the world economy was small, this rise caused no major problems. But now its share has topped 10%, and in the 2020s it is likely to top the 20% mark. If the Chinese continue to build up their military might and to seek greater political influence in line with the growing scale of their economy, an increasing number of countries around the world will probably join the countries of East Asia in viewing China’s rise as a threat.

How should Japan respond to these global and regional challenges? The most important points are to maintain the balance of power in East Asia and the Asia-Pacific region and, on this basis, to contribute to the formulation of the international rules for the twenty-first century. For this purpose it is essential to revive the Japanese economy, strengthen our alliance with the United States in the diplomatic and security spheres, and undertake strategic political alignments and security cooperation with other partners.

Over the past year Prime Minister Abe Shinzō energetically pursued this agenda, doing what needs to be done for this purpose. This makes it all the more unfortunate and regrettable that he decided to visit Yasukuni Shrine at the end of the year. The Chinese and South Koreans have been criticizing Japan for turning to the right under Abe, and the prime minister’s visit to Yasukuni has produced more support for this view among people in places like Europe and the United States and also in other East Asian countries. This action has done absolutely nothing to advance Japan’s interests. What Japan ought to be doing is to work in tandem with other countries that espouse the market economy and liberal democracy to contribute to the evolution of the US-led international political and economic order.

(Originally written in Japanese on January 6, 2014.)

(*1) ^ Mōri Kazuko and Masuda Hiroshi, trans., Shū Onrai–Kisshinjā kimitsu kaidanroku (Record of the Secret Talks Between Zhou Enlai and Kissinger) (Tokyo: Iwanami Shoten, 2004), p. 46.

  • [2014.01.20]

Received his PhD in history from Cornell University. Is now president of the National Graduate Institute for Policy Studies and president of the Institute of Developing Economies, Japan External Trade Organization. He was an executive member of the Cabinet Office's Council for Science and Technology Policy from January 2009 to January 2013. His works include Teikoku to sono genkai (Empire and Its Limits) and Beyond Japan: The Dynamics of East Asian Regionalism (coeditor). Former editor in chief and currently senior editor of Nippon.com.

Related articles
Other columns

Video highlights

New series

バナーエリア2
  • From our columnists
  • In the news