On 12 March 2015, George Osborne, the Chancellor of the Exchequer of the UK, officially announced the intension of joining to be the founding member of the Asian Infrastructure Investment Bank (AIIB), a China-led global development bank. The UK was the first western country who wanted to join the AIIB. Un-afraid of the US complaint, a small step of the UK government created the ripple effect of attracting more European countries to follow suit. More significantly, it was a giant step for China to order and tentatively take charge of some aspects of the global economic infrastructure. The ‘paradigm shift’ from post-World War Two US constructed global economic infrastructure to a China-led future global economic ‘concert’ appeared to be attracting some serious audiences!

To choose China over the US, however, is a pill not to be swallowed easily by many countries. Not only that China is not a democratic country but that it is the most populated country in the world, and, by lots of social and economic measurements, it has not been fully developed yet. The single party state is a soul-searching question for most of democratic countries to terms with because it is so different from their own political system. Looking at the US increasing global ‘retreat’, nevertheless, the tough question such as has the rest of the world been free-riding on the US and even additive to US global order for too long? Has the world been relying on the US global economic leadership to an extent that statesmen pretended to be ignoring that the US has long been losing lots of its global economic commanding power? The 2008/09 global financial crisis was just another inconvenient example. Yet, to accept China’s increasing global economic command, countries should make huge adjustment on ideology, economic adaptation and even beliefs.

US President, Donald Trump, had already asked the United States Trade Representative (USTR) to investigate China’s intellectual property rights (IPRs) infringement and the impact on US trade and industry. Make no mistake! There are still enormous counterfeiting and piracy in China, big or small. But the mentality of the Chinese government toward the protection of IPRs has changed to be trying to harness the IPRs and to further using technology to derive next phase of the economic development. Made in China 2025 and the New Normal of China’s economic policy have been signposting the same direction that innovation and creativity are two major linchpins to safeguard China’s future global economic status. IPRs is now working toward China’s own national interest and things can be very challenging to China when getting more patents applications while trying to fully implement the legal protection at home. Trump’s potential trade war with China and the recent ‘settlement’ with ZTE (a leading Chinese smartphone giant) who paid US$1 billion penalty to the US over violation of the US sanctions programme, might further push China to catch-up faster in creating high-tech and advanced industries with more indigenous intellectual property components.

China surprised the world by not devaluating its currency after the Asian financial crisis in 1997 ultimately earned trust from many devastated East Asian economies who were first ‘robbed’ by the global speculators and later ‘bombarded’ by the international monetary fund’s (IMF) rescue packages. Essentially, the Asian financial crisis opened up the question about the role of the US economic power and the effectiveness if not the ‘sincerity’ of the IMF in bailing out East Asian economies. Furthermore, the 1997 Asian financial crisis inevitably helped ‘train’ and thereafter strengthened the economic muscles of most of the East Asian economies. When the sub-prime crisis hit the US and the bailing-out or even collapsing of the largest investment banks in the 2008/09 global financial crisis took place, the world clearly have witnessed the dichotomy between a more sturdy East Asia and a topsy-turvy US economy. China’s swift response and the injection of trillions of yuan in its economy and the contrasting bailing out of the US government on those ‘fat cats’ investment banks accelerated the distrust on US global economic leadership. A more far-reaching impact of these episodes led to a more robust debate on the internationalization of Chinese currency (renminbi) and whether it can challenge US dollars hegemony.

The view of the global political economy has become more polarised over the debate between the market and the state. Although the state has always been considered as neither effective in distributing resources nor being able to understand the market signals, the market failure of 2008/09 global financial crisis appeared to be more profound and obvious. Emerging and wealthy state, like China, has suddenly become popular again. Its huge foreign reserve has been fuelling up enormous investment through the ‘go out’ strategy. This is an area in which the China Investment Corporation (CIC), a sovereign wealth fund, has been trying to facilitate. That conundrum between the state and the market draws the attention of the world back to the enormous wealth occupied by China; and clearly many countries want to see if China can do anything better than the market!

China’s previous role in the world economy has been very tangential. Having huge economic prowess as well as being the ‘factory of the world’ does not necessarily of translating into global economic power automatically. Without a doubt, economic preponderance is a significant source of power in the current fragile global economy. We are heading toward a global economy that is constantly scrutinising China’s economic footprints as well as perpetually adjusting the belief in market principles in order to further integrate China!

Gordon C K Cheung is Associate Professor in international relations of China in the School of Government & International Affairs at Durham University, United Kingdom.

China in the Global Political Economy is available now.

Read chapter one on Elgaronline.