Almost any foreign official, businessman or journalist visiting Beijing has heard the mantra that China can’t be expected to open up its markets or meet more stringent international standards because it’s still a developing economy. Maybe that argument was valid 20 years ago. Now it’s increasingly tenuous.
Pleading poverty ignores the tremendous economic progress China has made in the last few decades. When China joined the World Trade Organization in 2001, it was the world’s sixth-largest economy and at an early stage of reorganising state-owned enterprises to compete globally. China is now the world’s second-largest economy and its largest trading nation. It’s home to some of the largest globally competitive firms, accounting for 115 of the Fortune 500 largest companies in the world in 2017.
China has moved up the global value chain dramatically, with a world-class export sector bigger than that of any other G-20 economy. It boasts a large domestic high-tech market and technology firms that are fast becoming global leaders. The country has been granted the largest number of patents globally since 2015. Over half its population — some 700 million people — use smartphones. As of September 2017, China had the second-largest number of unicorns after the US — some 98 companies.
True, while China’s per capita income reached $US8,830 ($11,160) in 2017, up eight-fold from 2001, it’s still well below the World Bank’s $US12,236 threshold for high-income countries. This measure is misleading, however. Already an upper-middle-income nation, China has a high-income country living inside of it. Over 200 million Chinese live in high-income areas, including the cities of Beijing, Tianjin and Shanghai, and the powerhouse coastal provinces of Jiangsu and Zhejiang. Jiangsu alone has a population of 80 million people and per capita GDP of almost $US17,000 — higher than Argentina, Chile and Hungary. Shenzhen’s 12 million residents boast a per capita GDP of more than $US27,000 in nominal terms.
China has also become systemically important financially in a way few other countries are. It houses the world’s largest banking system, second-largest equity markets and third-largest bond market, and is promoting a larger international role for the renminbi. In recent years, China has become the world’s largest net exporter of capital; its policy banks have extended more lending to developing economies than all of the multilateral development banks combined.