The new key duality in the global economy

The world economy is to a large extent driven by the economies of United States and China. The growth of the Chinese economy, particularly in the last 20 years, has been staggering. Until recently, much of this growth came from producing labour-intensive, low value-added goods. Today, however, Chinese competitiveness is no longer confined to lower-end production. The Chinese system is now focused on helping Chinese firms move up the industrial value chain.

Moreover, Chinese policymakers have set goals of assisting the international expansion of Chinese firms in a desire to “go global” and have made efforts to build internationally recognizable brands. Chinese companies have emerged to challenge traditionally dominant international firms. Two such companies in the technology sector are Huawei and Lenovo. In the automobile industry, we have companies such as Geely, who bought the Swedish Volvo cars in 2010.

However China’s competitive advantage is not what it used to be as its economy is maturing and rapid development drives up labour costs. Financial Times reported on this earlier in the week, and in the video below Diana Choyleva, head of macroeconomic research at Lombard Street Research, discusses with Financial Times John Authers how the next rebalancing of global economic power could occur. It is a very interesting discussion.

Rebalancing of power

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