China, the Interdependent Giant, and the Global Economic Crisis

The global economic crisis revealed China to be an interdependent giant, one whose 'rise' was undeniable but also one whose deepening participation in transnational production sharing and network trade made it highly susceptible to an external shock. China weathered the storm relatively well - avoiding a recession, in particular - not because it had 'decoupled' from the G7 economies but because its stimulus measures were unusually swift and powerful. One cost, however, has been a worsening domestic imbalance between investment and consumption that carries a heightened risk of asset price inflation, non-performing loans and destabilising levels of local government debt. Meanwhile, China's ties to the world economy have not fundamentally changed since the crisis began. Despite stirring leader rhetoric and summit declarations, the BRICS have made only modest progress in meeting their goals. East Asia, North America and Europe remain China's principal trade partners, and cross-border production chains connecting these regions remain the dominant mode of China's incorporation into the world economy.