The most populous countries are not necessarily the richest today, the authors note, largely because of migration. In a 2018 paper, Klaus Desmet, Dávid Krisztián Nagy and Esteban Rossi-Hansberg showed that in a world of restricted cross-country trade and migration, countries with large populations can provide more opportunities to increase economic output through internal trade and specialisation. As for technological progress, a larger population implies more talent and higher returns for innovation.īut, amid the retreat from globalisation, China’s advantage may be even greater. Recognising the potential of its own massive internal market, China’s leaders have long sought to increase domestic demand as a hedge against external changes. This shift likely would have happened even if Sino-American relations had not deteriorated as they have, owing to China’s enormous population.
Instead, the increased role of the state in the economy and a shift toward self-reliance should be interpreted as a response to a changing - and, at times, hostile - external environment. China is unlikely to return to a state-controlled economy or enact isolationist policies. Some even worry that China will return to the development model that predominated before Deng Xiaoping launched the country’s “reform and opening up”. They fear that the country is prioritising its geopolitical objectives over the quest to build a market economy. Outsiders are deeply suspicious of China’s moves to increase state control over its economic development, such as imposing new regulations on tech companies and capital markets. China also plans to invest heavily in cutting-edge sectors, such as artificial intelligence and semiconductors, and work to achieve self-sufficiency in core technologies. The “dual-circulation strategy” announced in the plan instead emphasises reliance on the country’s huge population. To this end, China’s 14th Five-Year Plan makes clear that the country will seek to reduce its dependence on external demand.
But now it seems that China must prepare for a future characterised by higher trade barriers and restrictions. For that reason, China had been working hard to align its economic and trade activities with international rules and norms. This is not good news for China, which would prefer that the world maintain the economic openness it achieved in recent decades. But as political pressures and the coronavirus push many countries - particularly the United States - to embrace more nationalist policies, the heyday of globalisation soon could be replaced by a post-pandemic era shaped by national-security concerns and border controls. SHANGHAI - In just four decades, China’s economy has achieved an unprecedented level of wealth and development, and, until recently, its upward trajectory of economic growth and prosperity seemed set to continue.
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