China

rise as a global economic power

21st Century · 2000 – present

China's rise as a global economic power is one of the largest shifts in the world economy in modern times. In 1978 the People's Republic was a poor, mostly rural country with a planned economy. Over the following decades it opened to trade and investment, allowed private enterprise and moved hundreds of millions of people out of extreme poverty. By around 2010 it had become the world's second largest economy by total output and the largest exporter of goods.

The turning point for the twenty-first century came in December 2001, when China joined the World Trade Organization. Its factories became central to global supply chains, its cities grew rapidly, and its companies, banks and state projects such as the Belt and Road Initiative reached across Asia, Africa and beyond. The rise has brought trade disputes, debates over debt, technology and security, and slower growth in recent years. It also changed the balance of economic power between China, the United States and the rest of the world.

Things happened, and the rest is history

Reform and opening up, 1978
Event
What happened
After Mao Zedong's death in 1976, Deng Xiaoping emerges as China's leading figure. At the Third Plenum of the Eleventh Central Committee in December 1978, the Communist Party shifts its focus to economic development. Farm households are allowed to work land under contract, and in 1980 special economic zones such as Shenzhen are set up to attract foreign investment.
The rest is history
Farm output rose, and rural and then urban private enterprise expanded through the 1980s. Foreign capital and export manufacturing grew, first along the southern coast. Reforms were debated and sometimes slowed, but the direction held. Average annual growth in output was close to 10 percent for about three decades, which laid the base for China's later place in world trade.
Sources
1. BookVogel, Ezra F. Deng Xiaoping and the Transformation of China. Cambridge, MA: Harvard University Press, 2011.
2. BookNaughton, Barry. The Chinese Economy: Transitions and Growth. Cambridge, MA: MIT Press, 2007.
Deng's southern tour, 1992
Event
What happened
After the 1989 Tiananmen protests and their suppression, conservative critics question the pace of market reform. In early 1992 Deng Xiaoping, then without a formal top post, visits Wuhan, Shenzhen, Zhuhai and Shanghai. He publicly urges faster reform and more openness. Later in 1992 the Party's Fourteenth Congress adopts the goal of a 'socialist market economy'.
The rest is history
The tour is widely seen as having restarted reform after a period of hesitation. Foreign investment surged in the following years and Pudong in Shanghai was developed as a new financial district. Investment and exports grew quickly through the 1990s. This prepared China for the trade negotiations that ended in membership of the World Trade Organization.
Sources
1. BookVogel, Ezra F. Deng Xiaoping and the Transformation of China. Cambridge, MA: Harvard University Press, 2011.
2. BookNaughton, Barry. The Chinese Economy: Transitions and Growth. Cambridge, MA: MIT Press, 2007.
Hong Kong returns to Chinese rule, 1997
Event
What happened
Under the Sino-British Joint Declaration of 1984, Britain agrees to return Hong Kong to China. On 1 July 1997 sovereignty is transferred, and Hong Kong becomes a Special Administrative Region under the principle of 'one country, two systems'. Macau follows in December 1999.
The rest is history
Hong Kong kept its own currency, legal system and customs territory, and remained a major financial and shipping centre linking China to world markets. It also served as a main channel for investment into the mainland. The arrangement later became a source of political dispute over its autonomy. In the early 2000s the territory was a central gateway for China's growing trade.
Sources
1. PrimaryJoint Declaration of the Government of the United Kingdom and the Government of the People's Republic of China on the Question of Hong Kong. Treaty signed in Beijing, 19 December 1984.
2. BookCarroll, John M. A Concise History of Hong Kong. Lanham, MD: Rowman & Littlefield, 2007.
China joins the World Trade Organization, 2001
Event
What happened
After about fifteen years of negotiation, China is approved for membership of the World Trade Organization at Doha in November 2001, and formally joins on 11 December 2001. It agrees to lower tariffs and open many sectors to foreign firms. The United States had granted permanent normal trade relations in 2000.
The rest is history
Membership gave exporters secure access to world markets, and China's exports and foreign investment grew very fast. Its goods trade surplus rose sharply through the 2000s. Economists have also studied the effect on manufacturing jobs in other countries, an effect often called the 'China shock'. China overtook Germany as the largest exporter of goods in 2009.
Sources
1. PrimaryProtocol on the Accession of the People's Republic of China. World Trade Organization, adopted 10 November 2001, in force 11 December 2001.
2. ArticleAutor, David H., David Dorn, and Gordon H. Hanson. "The China Syndrome: Local Labor Market Effects of Import Competition in the United States." American Economic Review 103, no. 6 (2013): 2121-2168.
Beijing Olympics and the 2008 financial crisis
Event
What happened
In August 2008 Beijing hosts the Summer Olympic Games, a showcase of the country's new wealth and infrastructure. A few weeks later the collapse of Lehman Brothers deepens a global financial crisis. In November 2008 China announces a large stimulus package, often reported as about 4 trillion yuan, and state banks greatly expand lending.
The rest is history
China's growth stayed strong while many rich economies shrank, and it contributed a large share of global growth in the years after. The stimulus built roads, railways and housing, but it also raised local government debt and property investment. In 2010 China passed Japan as the world's second largest economy by nominal output. Debates about debt and overcapacity date largely from this period.
Sources
1. BookNaughton, Barry. The Chinese Economy: Transitions and Growth. Cambridge, MA: MIT Press, 2007.
2. BookBrandt, Loren, and Thomas G. Rawski, eds. China's Great Economic Transformation. Cambridge: Cambridge University Press, 2008.
The Belt and Road Initiative, 2013
Event
What happened
In September 2013 Xi Jinping, speaking in Kazakhstan, proposes a 'Silk Road Economic Belt', and in October in Indonesia a 'maritime Silk Road'. Together these become the Belt and Road Initiative. China's banks and companies finance ports, railways, roads and power plants in dozens of countries, and in 2015 the Asian Infrastructure Investment Bank is founded with Chinese backing.
The rest is history
The programme extended Chinese lending and construction across Asia, Africa and Europe. Supporters point to new infrastructure, while critics point to heavy debts in some borrowing countries and to China's growing strategic influence. Many projects were later scaled back or renegotiated. By the early 2020s well over a hundred countries had signed cooperation documents under the initiative.
Sources
1. BookHillman, Jonathan E. The Emperor's New Road: China and the Project of the Century. New Haven: Yale University Press, 2020.
2. BookFrankopan, Peter. The New Silk Roads: The Present and Future of the World. London: Bloomsbury, 2018.
The US-China trade war, from 2018
Event
What happened
In 2018 the United States imposes tariffs on hundreds of billions of dollars of Chinese goods, citing trade deficits, intellectual property and technology transfer. China answers with tariffs of its own. A partial 'Phase One' trade agreement is signed in January 2020.
The rest is history
Most of the tariffs stayed in place, and later measures restricted exports of advanced chips and other technology to Chinese firms. Companies began to move some production to other countries. The dispute reflected a wider rivalry over technology and security between the two largest economies. Trade between them remained very large.
Sources
1. BookWei, Lingling, and Bob Davis. Superpower Showdown: How the Battle Between Trump and Xi Threatens a New Cold War. New York: Harper, 2020.
2. PrimaryEconomic and Trade Agreement between the Government of the United States of America and the Government of the People's Republic of China. Signed in Washington, 15 January 2020.
Property slowdown and a changing economy, 2020s
Event
What happened
In 2020 Chinese authorities introduce limits on borrowing by property developers, known as the 'three red lines'. In 2021 the developer Evergrande misses payments on its debts, and other developers follow. Home sales and construction fall sharply, and Covid-19 controls, which lasted until December 2022, weigh on activity.
The rest is history
Property had been a very large part of the economy, so the slump slowed growth and hit local government finances. Official growth rates fell below the pace of earlier decades. Policy has since put more weight on manufacturing, technology and exports such as electric vehicles. How far China's growth can continue is debated by economists.
Sources
1. ArticleRogoff, Kenneth, and Yuanchen Yang. "Peak China Housing." NBER Working Paper 27697. Cambridge, MA: National Bureau of Economic Research, 2020.
Napoleon's sleeping giant
Popular belief
The legend
Napoleon is said to have warned, 'Let China sleep, for when she wakes, she will shake the world.' The line is often quoted whenever China's economy is in the news.
The rest is history
No reliable source shows that Napoleon said this. The remark is usually traced to a book by Alain Peyrefitte, Quand la Chine s'éveillera, le monde tremblera, published in 1973, which borrowed the idea and popularised the phrase. Nineteenth-century writers did already describe China as a 'sleeping' power. The quotation tells us more about Western views of China in the twentieth century than about Napoleon.
Sources
1. BookPeyrefitte, Alain. Quand la Chine s'éveillera... le monde tremblera. Paris: Fayard, 1973.
Every Chinese will buy a shirt
Popular belief
The legend
Western merchants in the nineteenth century are said to have dreamed that if every person in China bought just one shirt, or added an inch to their shirt-tails, the mills of Lancashire would be kept busy for years. The idea of a vast untapped Chinese market is repeated as a standing joke of business history.
The rest is history
The dream of a huge Chinese market is real and was widely voiced by traders and politicians from the nineteenth century onward. The specific shirt-tail story is a later retelling, and its exact origin is unclear. Foreign sales to China stayed modest for most of that period. The market only became enormous after the reforms of 1978 and, above all, after WTO entry in 2001, when China became a major buyer as well as a seller.
Sources
1. BookHunt, Michael H. The Making of a Special Relationship: The United States and China to 1914. New York: Columbia University Press, 1983.
Deng's 'It doesn't matter if a cat is black or white'
Popular belief
The legend
Deng Xiaoping is said to have declared that it does not matter whether a cat is black or white, so long as it catches mice. The saying is taken to sum up China's practical turn from ideology to results.
The rest is history
Deng used a version of this proverb in 1962, in a speech about farm recovery after the Great Leap Forward, quoting a Sichuan saying about yellow and black cats. It was used against him during the Cultural Revolution. He was not announcing it as a slogan in 1978, although it came to describe his approach. His own better-known phrase from the 1980s, 'seek truth from facts', carried a similar message.
Sources
1. BookVogel, Ezra F. Deng Xiaoping and the Transformation of China. Cambridge, MA: Harvard University Press, 2011.
The Great Wall seen from space
Popular belief
The legend
The Great Wall is said to be the only human-made structure visible from the Moon or from space with the naked eye. It is often cited as a symbol of Chinese scale and ambition.
The rest is history
The claim is false for the Moon, and in low Earth orbit the wall is very hard to pick out because it is narrow and similar in colour to its surroundings. Yang Liwei, China's first astronaut, said in 2003 that he could not see it. Other structures such as highways, airports and city lights are easier to spot. The story is older than spaceflight and appeared in print in the 1930s.
Sources
1. BookWaldron, Arthur. The Great Wall of China: From History to Myth. Cambridge: Cambridge University Press, 1990.

← Back to the outline

Things happened, and the rest is history

Reform and opening up, 1978

Deng's southern tour, 1992

Hong Kong returns to Chinese rule, 1997

China joins the World Trade Organization, 2001

Beijing Olympics and the 2008 financial crisis

The Belt and Road Initiative, 2013

The US-China trade war, from 2018

Property slowdown and a changing economy, 2020s

Napoleon's sleeping giant

Every Chinese will buy a shirt

Deng's 'It doesn't matter if a cat is black or white'

The Great Wall seen from space