China and the Global Economic Order: A Discreet Yet Undeniable Contestation

By Nicolas, Françoise | China Perspectives, April 1, 2016 | Go to article overview

China and the Global Economic Order: A Discreet Yet Undeniable Contestation


Nicolas, Françoise, China Perspectives


Introduction

Attempts to impose a new global economic order are not a recent phenomenon. In the 1960s and '70s, developing countries tried to achieve this within the framework of the United Nations Conference on Trade and Development (UNCTAD), but in the absence of a credible leader they did not have much success. Recently, it seems that China has launched a new offensive with this in mind, seeking, if certain analysts are to be believed, to impose its own vision as the world's second-largest economic superpower, with the intention of becoming the first. Having supported the Beijing Consensus instead of the Washington Consensus, China(1) may be in the process not only of reshaping, but also of redefining the global economic order, by establishing new institutions such as the Asian Infrastructure Investment Bank (AIIB).

How can China's change in stance be explained, when until now it has kept a relatively low profile? How are we to interpret this, and what might be the consequences? What is the exact nature of these initiatives? Can we in fact speak of the emergence of a new, Chinese-style global economic order? These are the questions that this article will endeavour to answer.

With that in mind, the article will re-examine China's recent initiatives within a longer-term perspective. First of all, it will give an overview of China's strategy in the face of the global economic order as defined and imposed following the Second World War, then it will look at how China's position in matters of international economic governance has evolved in tandem with its economic take-off, and finally it will analyse the various initiatives taken recently by Beijing, in order to determine whether we really are heading for a new global economic order dominated by China.

China and the international economic order of Bretton Woods: (2) From collaboration to contestation

China, beneficiary of the Bretton Woods Agreement

Throughout the whole period of development and reform (which began in the late 1970s), China remained largely marginalised from the governance of international economic order as defined by Western powers in the wake of the Second World War. Nor indeed did it attempt to challenge this order: in fact, China even seemed quite comfortable with an economic order ruled by America and the West, be it in a commercial or a monetary capacity.

As a result, China was able to benefit considerably, for example, from aid from the World Bank. After joining the institution in 1980, the People's Republic of China (PRC) became one of the institution's main "clients," borrowing over $40 billion over the course of a quarter of a century, and subsequently funding nearly 300 investment projects, with one of the highest success rates ever recorded by the institution.(3)Although this financial aid was considerable, it still accounted for less than 1% of total investment in the country, and in terms of investment per capita remained far below what had been observed in other developing countries. For this reason, it could not be held responsible for the country's strong economic performance.

As well as receiving financial aid from the World Bank, the PRC also benefited from its technical assistance services and training activities. Interestingly - and surprisingly - enough, the Bank has never curtailed China in its choice of economic policy, having accepted right from the start that China's development strategy would be a unique case.(4)A report published in 2007 examines in detail China's contributions to the institution, alongside the benefits that the PRC received through its cooperation with the Bank. (5)

Relations between China and the International Monetary Fund (IMF) were no more complex. While China never received financial assistance from the Fund,(6)it was nevertheless able to take full advantage of cooperating with the institution by making regular use of its technical assistance services, and by holding regular consultations on its options for macroeconomic policy. …

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