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Global Insight Big Picture How will China shape the world? China is set to overtake the USA as the world’s biggest economy in the next few years. But growth has begun to slow, so the government will have to find a new economic focus in order for the economy to keep expanding George Magnus In less than half of a lifetime for most people, China has exploded out of poverty to take its place at the heart of the global economic system, become the world’s second largest economy and its biggest export nation – and emerged as a geopolitical rival to the USA. The speed of this transformation is unprecedented. Many believe that a rising China, juxtaposed against the alleged decline of the West, will spread its economic and political influence around the world. Some even think the wheels of history are turning full circle as a Sino-centric world reemerges for the first time since the 18th century. But there is also much hyperbole behind these simplistic assertions. China’s ability to shape the world depends in large measure on how it shapes itself. It certainly seems likely that China’s rising economic weight in the world will affect the way that the world economy and global economic governance work. Sometime in the next five to seven years, China is likely to overtake the USA to become the largest economy in the world. It will use its economic power to secure a bigger say and a greater advantage in global institutions, such as the IMF and World Bank, and over matters from global security to climate change. It will seek to extract political and economic gains from trade and investment arrangements in Asia and Europe, and can be expected to counter the US initiative to develop the Trans- Pacific Partnership. It has already become the second-biggest recipient of foreign direct investment and is gradually establishing itself as a source too. For example, it has concluded important agreements with the UK in 2013 to invest in the nuclear and financial services industries. In international monetary relations, China has been quite open in its criticism of a US dollar-dominated Chinese companies are leaving global footprints. There are now 89 companies headquartered in China in the Fortune 500 list 20 l www.global -br ief ing.org f i rst quar ter 2014 global


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