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From Participant to Shaper--The Global Role Transformation of China's Economy

Aug 29-2025   



*This article is based on a speech given by Wang Min, Associate Professor of Economics at the National School of Development, Peking University.

 

The Overall Rise and Global Impact of the Chinese Economy

When China launched its reform and opening-up policy in 1978, it was a closed economy with a per capita gross domestic product (GDP) of only $156. By 2024, China has evolved into an open economy, with per capita GDP reaching $13,400. Currently, China is the world’s largest exporter, second-largest importer, and third-largest outward investor. Over the past three decades, its share of global GDP has increased by 15 percentage points. In 2004, China’s manufacturing sector accounted for approximately 8% of global manufacturing GDP; by 2021, this proportion had risen to around 30%.

 

Perspective 1: The Pivotal Transformation of China’s Foreign Trade

As of 2023, China’s exports had reached $3.56 trillion and imports $2.71 trillion, accounting for 15% and 11% of the global total, respectively. In 2024, China recorded a substantial trade surplus of up to $800 billion—a deep-seated factor behind trade frictions between China and the United States.

Looking at the evolution of China’s import and export model: in the early 1990s, China’s low per capita income gave it a comparative advantage in labor-intensive products, leading to a "two-ends-out" model dominated by processing trade. Over the following three decades, as the economy grew and per capita income rose, China underwent structural economic transformation, with the share of capital goods exports steadily increasing. On the import side, key changes included: a sustained and significant rise in the proportion of raw material imports; an initial increase followed by a decline in capital goods imports; a steady drop in the share of intermediate goods imports; and a slight overall upward trend in consumer goods imports. These shifts in import and export data reflect changes in China’s comparative advantage within the global trading system.

 

Perspective 2: The Transformation of China’s Outward Investment

China’s outward foreign direct investment (OFDI) primarily falls into two categories: cross-border mergers and acquisitions (M&As), and greenfield investment. In the early stages, cross-border M&As accounted for a significant share of total OFDI—between 2004 and 2011, they made up 42% of China’s outward investment. Starting in 2004, China began to demonstrate comparative advantages in the production of capital-intensive goods, with its global market share gradually expanding. Subsequently, the proportion of M&A investment continued to decline, while that of greenfield investment rose steadily. Since the launch of the Belt and Road Initiative in 2013, the share of China’s outward investment in the manufacturing sector has increased markedly, driven by rising domestic labor costs, international trade frictions, and geopolitical tensions.

 

Perspective 3: General Laws of Global Industrial Transfer

According to the World Bank’s report  Reshaping the Geography of the World Economy , regional economic development follows three spatial patterns: the concentration of economic activities in central cities; population mobility driving balanced per capita living standards; and the "neighbor effect"—where economic growth spreads to surrounding regions after local costs rise. China’s current industrial transfer is characterized by multi-directional spillover. After the onset of China-U.S. trade frictions in 2018, Europe, Central Asia, Latin America, and the Caribbean emerged as destinations for emerging industry transfers—indicating that the "neighbor effect" continues to play a role in global industrial relocation.

 

Future: The Significance and Challenges of China’s Economic Cooperation with the Global South

China’s economic growth has exerted a profound impact on the global economic landscape through the Belt and Road Initiative. World Bank data shows that investment in transportation infrastructure alone has reduced travel time along Belt and Road routes by 8.5%, attracted 7.6% more foreign direct investment, and helped 7.6 million people escape poverty. Additionally, Chinese infrastructure enterprises have achieved notable progress in internationalization: in 2023, their foreign engineering contracting business accounted for 24.6% of the total revenue of the world’s top 250 engineering contractors.

A major challenge for Chinese manufacturing enterprises going global is that developing countries generally have weak industrial foundations and outdated infrastructure. Currently, the financial services of many Chinese manufacturing firms have not yet expanded internationally. By contrast, Japanese and U.S. companies have adopted a coordinated strategy involving governments, non-governmental organizations (NGOs), and financial institutions in their overseas expansion.

An even more pressing challenge is that intense competition in China’s domestic market has spilled over into the international arena. For enterprises, going global has become an irreversible trend of the times. China’s overseas investment has reached $3 trillion, compared with $8 trillion for the United States. Nevertheless, China has the potential to narrow the gap with—or even surpass—the United States in the future. When that happens, China’s economy will feature a dual structure, with parallel development of the domestic mainland economy and the overseas economy.

From Participant to Shaper--The Global Role Transformation of China's Economy

Aug 29-2025   



*This article is based on a speech given by Wang Min, Associate Professor of Economics at the National School of Development, Peking University.

 

The Overall Rise and Global Impact of the Chinese Economy

When China launched its reform and opening-up policy in 1978, it was a closed economy with a per capita gross domestic product (GDP) of only $156. By 2024, China has evolved into an open economy, with per capita GDP reaching $13,400. Currently, China is the world’s largest exporter, second-largest importer, and third-largest outward investor. Over the past three decades, its share of global GDP has increased by 15 percentage points. In 2004, China’s manufacturing sector accounted for approximately 8% of global manufacturing GDP; by 2021, this proportion had risen to around 30%.

 

Perspective 1: The Pivotal Transformation of China’s Foreign Trade

As of 2023, China’s exports had reached $3.56 trillion and imports $2.71 trillion, accounting for 15% and 11% of the global total, respectively. In 2024, China recorded a substantial trade surplus of up to $800 billion—a deep-seated factor behind trade frictions between China and the United States.

Looking at the evolution of China’s import and export model: in the early 1990s, China’s low per capita income gave it a comparative advantage in labor-intensive products, leading to a "two-ends-out" model dominated by processing trade. Over the following three decades, as the economy grew and per capita income rose, China underwent structural economic transformation, with the share of capital goods exports steadily increasing. On the import side, key changes included: a sustained and significant rise in the proportion of raw material imports; an initial increase followed by a decline in capital goods imports; a steady drop in the share of intermediate goods imports; and a slight overall upward trend in consumer goods imports. These shifts in import and export data reflect changes in China’s comparative advantage within the global trading system.

 

Perspective 2: The Transformation of China’s Outward Investment

China’s outward foreign direct investment (OFDI) primarily falls into two categories: cross-border mergers and acquisitions (M&As), and greenfield investment. In the early stages, cross-border M&As accounted for a significant share of total OFDI—between 2004 and 2011, they made up 42% of China’s outward investment. Starting in 2004, China began to demonstrate comparative advantages in the production of capital-intensive goods, with its global market share gradually expanding. Subsequently, the proportion of M&A investment continued to decline, while that of greenfield investment rose steadily. Since the launch of the Belt and Road Initiative in 2013, the share of China’s outward investment in the manufacturing sector has increased markedly, driven by rising domestic labor costs, international trade frictions, and geopolitical tensions.

 

Perspective 3: General Laws of Global Industrial Transfer

According to the World Bank’s report  Reshaping the Geography of the World Economy , regional economic development follows three spatial patterns: the concentration of economic activities in central cities; population mobility driving balanced per capita living standards; and the "neighbor effect"—where economic growth spreads to surrounding regions after local costs rise. China’s current industrial transfer is characterized by multi-directional spillover. After the onset of China-U.S. trade frictions in 2018, Europe, Central Asia, Latin America, and the Caribbean emerged as destinations for emerging industry transfers—indicating that the "neighbor effect" continues to play a role in global industrial relocation.

 

Future: The Significance and Challenges of China’s Economic Cooperation with the Global South

China’s economic growth has exerted a profound impact on the global economic landscape through the Belt and Road Initiative. World Bank data shows that investment in transportation infrastructure alone has reduced travel time along Belt and Road routes by 8.5%, attracted 7.6% more foreign direct investment, and helped 7.6 million people escape poverty. Additionally, Chinese infrastructure enterprises have achieved notable progress in internationalization: in 2023, their foreign engineering contracting business accounted for 24.6% of the total revenue of the world’s top 250 engineering contractors.

A major challenge for Chinese manufacturing enterprises going global is that developing countries generally have weak industrial foundations and outdated infrastructure. Currently, the financial services of many Chinese manufacturing firms have not yet expanded internationally. By contrast, Japanese and U.S. companies have adopted a coordinated strategy involving governments, non-governmental organizations (NGOs), and financial institutions in their overseas expansion.

An even more pressing challenge is that intense competition in China’s domestic market has spilled over into the international arena. For enterprises, going global has become an irreversible trend of the times. China’s overseas investment has reached $3 trillion, compared with $8 trillion for the United States. Nevertheless, China has the potential to narrow the gap with—or even surpass—the United States in the future. When that happens, China’s economy will feature a dual structure, with parallel development of the domestic mainland economy and the overseas economy.