Prof Zhang Jun

Opinion | Why China’s economy will continue to grow and attract investment

It is naive to believe that technological decoupling, trade sanctions or forced supply chain changes will end China’s economic expansion. The world has yet to appreciate the significance of China’s inward shift of economic gravity

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Shanghai heads the economic integration of the Yangtze River Delta, part of national strategic plans to integrate economic mega regions and generate domestic demand. Photo: AFP

Prof Zhang Jun

Published: 3:00am, 27 Jun 2020Updated: 3:00am, 27 Jun 2020

Widespread lockdowns and border closures to combat the Covid-19 pandemic have interrupted supply chains and largely paralysed the global economy. Yet its real weakness is not its vulnerable production networks but souring attitudes towards globalisation – and China in particular.

Fear of China’s growing economic clout is increasingly driving many foreign-trade and investment decisions, and not only in the United States. Concerns about manufacturing dependence on China have prompted calls to reshore production and cut the country out of supply chains. The US is even threatening technological decoupling.

But China’s critics are mistaken in assuming that its economic growth depends almost entirely on the maintenance of the global free-trade system and access to Western technology.

China is undoubtedly an important manufacturer but its real economic drivers over the past decade or so have been rapid growth in its purchasing power and fixed-asset investments – including in its thriving technology sector.

The world has not yet fully appreciated the significance of China’s inward shift of economic gravity. This is partly because many economists are too busy criticising China’s investment expansion and highlighting its debt risks. As a result, many politicians still think the most effective way to contain China is to target its position in trade and supply chains.

04:58

Can globalisation survive coronavirus or will the pandemic kill it?

To be sure, China is the largest beneficiary of economic globalisation mainly because of its integration into the global free-trade system before and after joining the World Trade Organisation in 2001.