China and globalisation

David Lipton (IMF)’s tweet:

China’s leadership in support of globalization also means addressing its own restrictions on trade and investment, including protecting intellectual property rights. [Link]

Dani Rodrik’s tweet (in response):

As the leading beneficiary of globalization by far, perhaps China has a few things to teach the rest of us on how to do it, including the IMF? [Link]

Chris Balding’s (tongue-in-cheek) tweet:

He has a point. I propose everyone become mercantilists and run 5% of GDP surpluses to increase savings. [Link]

Dani Rodrik’s ‘clarificatory’ tweet:

And in case people misunderstand, my point is not that others should replicate specific Chinese policies (patents, CA surpluses). It’s that each country needs its own domestic policy space to leverage globalization. [Link]

In spite of this ‘clarification’, several others have pushed Dani Rodrik back and correctly so.

Globalisation had many dimensions. In the main, it was about free trade, free capital flows and a bit about immigration. Asian societies were never hot on immigration. They were mostly beneficiaries of the on-off immigration policies of the West. I do not blame them. Many historical wrongs, etc., are involved here. Just a matter of fact.

On financialisation, well, the record of China is mixed. It has relied on debt finance even if it did not take the Wall Street route on other matters. Further, its infamous and blatant interventions in 2015 summer to shore up the stock market are not worthy of emulation at all.

Specifically, with respect to globalisation, China was the biggest beneficiary and not a contributor. So, it is an entirely valid criticism of his remarks that, on globalisation, the IMF should look at China and recommend the template to other developing countries. That is utterly infeasible and incorrect too.

IMF policies on capital flows, financial sector liberalisation and on the effectiveness and transmission of monetary policies with a failure to recognise asymmetry, etc. are undesirable. Clearly, China with respect to globalisation is not to be held up as an example.

I am not even sure if China could be held up as an example for several things in economics. Their sheer size, brazen unilateralism, beggar-thy-neighbour exchange rate policy, debt addiction have played no mean part in their economic growth. Their emphasis on primary education, technological openness, execution efficiency, mindfulness on scale are worthy of emulation.

Last but not the least, the United States was China’s biggest benefactor. That is a fat and that made a huge difference. John Pomfret’s book is a MUST READ on this. Without the support of the USA, there may not have been much to emulate about China.

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