Globalization, Convergence, and Chinaâs Economic Development

Fang Cai

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Chapter 2 Globalization, Convergence, and Chinaâs Economic Development

In: The Impact of Innovation on Globalization

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Fang Cai

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Type:: Chapter

Pages:: 11â29

DOI:: https://doi.org/10.1163/9789004464476_003

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Abstract

Although globalization was, in theory, believed to bolster the world economy and benefit all nations, past globalization waves, corresponding to various stages of the Industrial Revolution, had in fact excluded developing nations from participating in and benefiting from them, until the most recent wave of globalization beginning in the 1990s. Failure to understand the fundamental difference between this latter stage and the previous waves of globalization continue to interfere with our percep-tion of the problems facing the world. Using the framework of growth theory, this paper investigates the characteristics of the present wave of globalization since the 1990s. Major findings are twofold. First, international trade returned to its classic pattern, as theorized by Ricardo, Heckscher, Ohlin, and Samuelson, and developed and developing countries alike benefited from it, although in developed countries, the dividends failed to trickle down to ordinary workers due to the lack of any redis-tribution policy. Second, as a result of mutual gains, economic convergence occurred for the first time in history. By implementing its reform and opening-up policy, Chi-na created the institutional conditions necessary for its own growth and catching-up. A series of economic reforms contributed to the improvement of incentives and the reallocation of resources, thus increasing potential growth capacity. Meanwhile, opening up to the outside world in general and joining the WTO in particular have helped China realize its comparative advantage and gain the globalization dividend. The implications of this study can therefore be summarized: (1) domestic reform is a necessary condition for a country to participate in and benefit from globalization; (2) globalization ought to be open and inclusive so as to benefit all nations; and (3) a domestic redistribution policy is necessary if the dividend is to be shared among all groups.

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The Impact of Innovation on Globalization

Series:Â China in the World, Volume: 8

E-Book ISBN:: 9789004464476

Publisher:: Brill

Print Publication Date:: 19 May 2021

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Chapter 2 Globalization, Convergence, and Chinaâs Economic Development

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The Impact of Innovation on Globalization

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Chapter 2 Globalization, Convergence, and Chinaâs Economic Development