How China entered the global economy through the front door and came to dominate it

    How China entered the global economy through the front door and came to dominate it
    © AP Photo / Andy Wong

    At the beginning of the 2000s, China rose to the conquest of the global market with its Go Out or Go Global strategy: thus, Beijing increased its foreign economic activity and became one of the world’s economic leaders. Revyuh recounts how the Asian giant advances in its incessant expansion in the world market.

    The case of China’s economic development is emblematic: its economic presence abroad is the continuation of its domestic policy. For a long time, the Chinese authorities have constantly sought new paths for economic development.

    Beijing has achieved many things: over the past two decades, it has shown very good dynamics in economic growth. The Asian giant’s economy grew steadily and rapidly and did so only in a matter of 20 years.

    But China was not always an economic powerhouse. In the late 1990s, the Chinese economic system faced a series of problems related to the fact that the economy grew faster than consumption within the country. Then, the country’s political management found a solution: Chinese manufacturers had to reorient their products towards exports. In other words, the capital had to leave the country.

    In this sense, in one of the sessions of the National People’s Congress of China held in 2000, the strategy of the active exit of Chinese producers to global markets was proposed under the slogan “go out”. Thus the Go Out policy was born. The ultimate purpose of this strategy is the conversion of the People’s Republic of China into the largest economic power in the world by the 2020s, and it turns out to be quite fruitful.

    The strategy was based on two key points: it proposed to use the benefits of two markets – the foreign and the internal one – and of two sources of raw materials. In this way, the country would have more possibilities to modernize the economic structure and optimize the allocation of resources.

    A cunning expansion

    Thus, the Government in Beijing encouraged Chinese companies to exploit the natural resources of other countries more actively, increase exports, conquer new markets and open new sources for the entry of advanced technologies. Furthermore, the strategy meant that it was necessary to invest abroad more actively.

    The government has tried to encourage Chinese companies to create transnational companies using world experience. It has been proposed to focus the attention of these companies on the creation of famous Chinese brands to gain popularity among consumers in different parts of the world. The idea behind this policy is to create brands that are able to compete with other popular brands in the global market.

    The Go Out policy solves a series of tasks that the Chinese economy considers necessary to solve: it expands the market for Chinese products and strengthens its positions in the global market, opens up new sources of raw materials, increases exports. At the current stage, which began in 2010, China is engaged in the creation of transnational corporations that occupy a decent place in the world market.

    It has already begun to alter the methods of promoting exported products in foreign markets: Beijing is creating sales networks and marketing centers for its products in other countries. China, among other things, favors the creation of subsidiary companies abroad and increased capital outflow from its territory.

    Also in the focus of China’s economic strategy are measures aimed at expanding Beijing’s positions in the global labor market. Currently, the Chinese government encourages the participation of companies in construction works abroad.

    Soft power

    In 2018, the volume of China’s direct investments abroad was estimated at $ 130 billion, which is a growth of 4.2% compared to the previous year, according to data published in 2019 by the Ministry of Commerce of China.

    The structure of foreign investment continued to improve. These were largely directed at commercial services, the manufacturing sector, the retail and wholesale trade, and the extractive industries.

    The outflow of capital abroad and the opening of new companies and commercial chains are accompanied by the migration of entrepreneurs and the management of companies to other countries. But not only entrepreneurs and company leaders move abroad: China also exports labor in large quantities.

    The flow of money from Chinese working abroad to families who stayed in China amounts to several billion dollars a year. This flow of money ensures the growth of consumption and solves social problems within the country. Therefore, the growth of the export of labor is one of the strategic priorities of the Chinese Government.

    China becomes the center of production for the entire planet and, in this way, the Asian giant enters the global competition for the limited number of jobs. Beijing increases its activities in the world market for construction and engineering works. In short, the Asian country makes its expansion in the world through its soft power: its economic capabilities.

    For the most effective implementation of the economic strategy abroad, companies need qualified personnel with in-depth knowledge of their speciality. China needs specialists who can compete on the world stage and, considering that Chinese schools and universities cannot offer this level of professionalism, Beijing is betting on Chinese living abroad. They are the integral and most important part of your Go Out strategy.

    In short, the Go Out policy has proven its effectiveness over the past two decades and there is no doubt that Beijing will achieve all the goals set by its strategy in the years to come. 

    The Chinese example should serve as an example of success for other developing countries that face the same problems that China encountered in the early 2000s. But they will barely get to the same level as Beijing in the short term because it The latter has already covered a huge road in its economic development.