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February 20, 2017

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Shanghai: economic conduit for global south

CHINA is treading on the path the West fears now: Globalization. It utilized globalization for reducing poverty, raising living standards, decreasing infrastructural bottlenecks first at home then abroad, particularly its immediate neighbors. By engaging with other countries, it gives huge opportunities to developing countries to keep reaping the benefits of an inter-connected world.

When it comes to globalization, the West is radiating with a sense of anxiety and fear, and a feeling of being unprotected and exposed.

The Great Recession, Brexit, the waning influence of the US, the rise of populism and return of economic inequality are just a few of the crises the West has faced recently.

As inequality has widened and real wages for the majority of people have stagnated — all while governments have bailed out wealthy institutions at the first sign of trouble — populations have become less willing to accept the so-called “cost of adjustment.”

The rise of Bernie Sanders and Donald Trump in the United States is a product of this reaction, as is the strengthening of populist parties in Europe.

Robert Putnam wrote in painful detail of how globalization became self-flagellation in the recent US presidential campaigns. In his book, “Bowling Alone,” he describes how American elites had been building an empire at the expense of the nation, all in the name of globalization.

An unprecedented existential crisis has taken over the West. For instance, take the crisis of capitalism.

Capitalism today is at a dead-end as it has reached its limit to adapt. Inequality is its inherent characteristic. This is the reason economic inequality has made a comeback worldwide. The idea that markets should be free has utterly failed. They must be tamed and regulated to ensure people’s welfare. There must be one entity that allocates power and resources as well.

Different globalization

Here China’s form of market economy appears more relevant and workable. It is filling up the gaps left unbridged by the West. China utilized globalization differently and based on the maxim of joint learning and co-transformation.

With the help of globalization, China reduced poverty to an unimaginable extent. According to the country’s National Bureau of Statistics, poverty has been reduced by 94 percent from 1980 to 2015. It is filling an infrastructure gap in Asia, which is roughly around US$4 trillion. This infrastructure gap has translated into development bottlenecks across the region.

Today the US is even unable to stand up to its own lofty ideals of liberalism, let alone the global south. Its vision of an interconnected world through trade and investment has become myopic. This has created a vacuum to be filled by China.

Today the world is in need of a catalyst to accelerate economic growth and social development.

After the recent Davos Conference, the reigns of globalization have fallen into China’s hands, with Shanghai a significant international financial center and a conduit for channeling China’s growth benefits to the world.

Shanghai, being a poster-child of globalization, emerges as a conduit between China and the world. Since China’s reforms in 1978, it has become an engine of economic growth. It accounts for 8.3 percent of the country’s gross industrial output, 10 percent of cargo-throughput and 25 percent of China’s total trade.

The prospects of multinational enterprises are constantly improving because Shanghai has been working on building global centers of finance, shipping, trade and economy.

Last year, the port of Shanghai became the world’s busiest, and this year it started with a 17 percent rise in container throughput. Pudong New Area has become home to around 400 headquarters of multinational firms. For multinational conglomerates, Shanghai is a conduit not only to the expansive domestic market but to the global economy as well. Every day, more and more investors are participating in shaping the city’s pilot free trade zone.

But the road ahead is not smooth; it has plenty of bumps which China must guard against. Climate change, promotion of peace and security, creation of better and dynamic international institutions — these are some of the immediate issues it will have to confront.

China’s global development is inextricably linked to the evolution of financial centers and internationalization of the yuan. Shanghai’s success as an international financial, trade and economy center is contingent upon the aforementioned factors.

Making Shanghai an international financial center is a work in progress, yet authorities have to work on making the city a hub of evolution.

 

The author is Lecturer at the International Relations Department of NUML (National University of Modern Languages) Islamabad. Shanghai Daily condensed the article.




 

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