The Global Value Chains and the Evolution of Chinese Economic Model

Abstract

Synopsys of 70 Years of the Economic Model Evolution The historical evolution of the economic relations between China and the world in the last 70 years is correlated first with the Chinese economic struggle for economic survival and latter its economic growth sustainability. Each phase allowed China to establish different relations with the world and was closely followed by the Chinese economic diplomacy. Four stages in this process should be considered. In the first phase from 1949 till 1979, People’s Republic of China (PRC) closely followed the soviet economic model, with total nationalization of the means of production, closed economy, investment in heavy industry, light industry to replace imports, with the main economic activity being the artisanal agriculture; as we can see in Figure 1, this policy was a complete failure in economic terms, and China diplomatic relations were mainly with countries of Marxist-Leninist influence. According to the Word Bank, in the first 38 years of China, economic reform took 700 million people out poverty line in China at the same time benefiting the Global South economy due to the integration of the transnational enterprises global value chains with China. Chinese government understood the economic rational of global value chains, Flying Geese Model, and foreign direct investment theories and introduced policies to attract foreign capital, technology, production, and foreign buyers, placing China as the final stage of the production networks in Asia and also transforming China in the biggest buying market of many resources and energy suppliers from less developed countries in Asia, Africa, and South America. But a new model of Chinese economic development even more interconnected and interdependent with the world is now on move. Even quite before the world acknowledge the protectionist mindset of the US in Trump era, Chinese President Xi Jinping launched in 2013 a very ambitious initiative under the name of “One Road, One Belt, the 21st-Century Maritime Silk Road” to enhance a new stage of world globalization, which together with two complimentary initiatives: the “International Production Cooperation” and “Third-Country Market Cooperation”, and in complementarity with the “Made in China 2025” and “Internet Plus” plans will lead China to develop global value chains leaded by Chinese companies and integrating countries of Europe, Africa, Asia, and South America.