China has been the greatest beneficiary of the current wave of globalization. In the decade prior to China’s 2001 accession to the World Trade Organization, Chinese exports averaged just 2% of total world exports. By 2021, that share had risen to 12.7%.
China is unlikely to stay this course. Not only has there been a marked slowdown in the growth of global trade since the Global Financial Crisis of 2007-08, but the world is also afflicted by the confluence of endemic supply-chain disruptions, ongoing pressures of the US-China trade war, and an outbreak of “friend shoring” that aligns cross-border economic ties with like-minded geostrategic alliances. All these developments tighten the noose on China.
But there is a deeper issue. The leverage that China drew from the recent wave of globalization reflected China’s increased connectivity with major countries of the developed world — namely, the United States, Europe, Japan, and Canada. According to the IMF, these nations collectively accounted for about half of world GDP in 2000 when China’s export-led recovery took off in the aftermath of its WTO accession.
As China now aligns itself with Russia as its new “unlimited partner,” there is a growing risk that support from its “old friends” in the developed world could start to wane. Guilt by association could leave China on the losing end of friend shoring. Who will fill the void? Let’s take a stab at that by combining Russia, which accounts for just 3% of world GDP, with all the economies in Sub-Saharan Africa, the Middle East, and Emerging and Developing Europe. That overly generous assessment of China’s “new friends” amounts to just 20% of world GDP. Losing support from 50% of the world while gaining support from 20% puts China at a distinct disadvantage in the next wave of globalization. Turning your back on old friends has consequences.
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