China’s Pursuit of a New Economic Order
China has faced major challenges in carving out a global role befitting its economic might within the existing system. That is why China's government has lately scaled up its efforts to recast the world order – in particular, the monetary and trading systems – on its own terms.
SHANGHAI – Economists are increasingly divided over China’s economic future. Optimists emphasize its capacity for learning and rapid accumulation of human capital. Pessimists focus on the rapid decline of its demographic dividend, its high debt-to-GDP ratio, the contraction of its export markets, and its industrial overcapacity. But both groups neglect a more fundamental determinant of China’s economic prospects: the world order.
The question is simple: Can China sustain rapid GDP growth within the confines of the current global order, including its trade rules, or must the current US-dominated order change drastically to accommodate China’s continued economic rise? The answer, however, remains unclear.
One way that China is attempting to find out is by pushing to have the renminbi added to the basket of currencies that determine the value of the International Monetary Fund’s reserve asset, the Special Drawing Right (SDR). As it stands, that basket comprises the euro, the Japanese yen, the British pound, and the US dollar.