China and the Credit Crisis: The Emergence of a New World Order

CHAPTER 4

From G8 to G20: China’s Role in Global Governance

The credit crisis changed the world’s view of China, to something like an island appearing over the horizon to a boatload of shipwreck survivors. China’s large cash reserves and economic growth made it stand out at a time when developed countries were shrinking and had to borrow heavily to shore up their own crisis-hit economies. There are new expectations of China’s role in global governance. And China is showing signs that it is aware of the expectations requiring it to step from behind America’s shadow into the limelight. Like a large tree shedding one of its heaviest branches, thereby allowing smaller trees around it to reach up to the sunlight, the weakening of the United States as a result of the 2008 crisis has encouraged changes in the configuration and relative positioning of the major countries in the world. Among the major countries which surround America in the global order, China is in a special position. Simple mathematics demonstrates that its economy will overtake Japan’s in absolute size in two or three years, and America’s in between 20 and 30 years from now.

China’s Challenge

This challenge comes to China at an early time in its emergence. At home, a great deal remains to be done. Much of China’s economy remains immature and undeveloped. For instance, its financial sector is still unable to support much of the economy’s development. The government still controls tightly the international use and external ...