Opening: What Position on Regional and Global Economic Architecture?

The 30 years of reform and opening have brought great material progress to China. By becoming a big country, China’s actions created huge spillovers on other countries. The result has been a rise in trade tension between China and its trade partners. Recently, some have claimed that China’s prolonged large trade surpluses have undermined global financial stability and tilted the world into a deep recession, if not, a 1930s-style depression. Others have claimed that the greenhouse gases from China’s industrialization would soon cause cataclysmic global climate change. One blunt but effective way to eliminate these negative spillovers is to restrict imports from China. Labor in the rich countries are under considerable stress because of the deep global structural adjustments brought by, one, the integration of the labor force of China, India and the Soviet bloc into the world economy; and, two, the acceleration of technological innovations (as exemplified by the revolution in information technology). The new global equilibrium could be a win-win outcome for the world but the process of moving to it is a painful one. Protectionism to avoid the transitional pains is, however, likely to end up in a lose-lose outcome for the world