China's geoeconomic strategy: China’s international future

Abstract

Over the past two decades China has become integrated in the world economy to an extent unprecedented in the country’s history. When foreign investment returned to China in the early 1990s, after the shocks of the Tiananmen events, it was at a pace and level never seen before. The combination of a dedicated and cheap workforce and the hope of buying into China’s own domestic development led to the country leap-frogging all others in terms of foreign direct investment (FDI). Over the course of the whole decade China was second only to the United States in attracting FDI – a remarkable change, given that foreign investment of any kind had not existed in China prior to 1980. Up to today the changes in China’s economic system have to a large extent been driven by the needs created by foreign investors. For instance, a legal framework of ownership had to be created to serve those who wanted to invest in China. The same framework could then serve China’s own embryonic capitalists. Similarly for stock exchanges, insurance arrangements, and quality control. China’s bid to join the World Trade Organisation (WTO), which fi nally succeeded in 2001 (very much thanks to the goodwill of the United States), was intended to serve China’s export potential, but also made the country sign up to stringent regulations concerning state subsidies (or rather the absence thereof), industry standards, copyright protection, and not least opening the Chinese market to foreign competition. The international drove the domestic in terms of economic change