Open Questions | Oxford’s Ian Goldin on why globalisation is ‘alive and well’ in Asia
Professor and former World Bank official says globalisation will become ‘more Asian’ in wake of US policy, with China as a potential leader
Ian Goldin is a professor of globalisation and development at the University of Oxford. Before his time in academia, he worked at several development lenders, including the World Bank, where he served as director of development policy and vice-president. His latest book, The Shortest History of Migration, was published in July 2024.
Where do you think globalisation is heading? Is globalisation dead?
Globalisation is not dead. It’s alive and well in Asia. This region has demonstrated the success of globalisation. Asia would not be where it is – growing at 5 per cent a year, eliminating extreme poverty – without globalisation.
Globalisation is becoming more fragmented, more regional. The challenge is that it’s becoming more Asian, as the US wants to remove itself from it. It’s important that Africa and Latin America continue to integrate into the global economy.
And globalisation is not only about the movement across national borders of good things – vaccines, cars and everything else – but also the risks associated with it. The Covid-19 pandemic was a manifestation of globalisation. The risks are growing along with the benefits.
What does that shift in structure mean for China?
China has been the biggest beneficiary of globalisation. Its opening up and growth have been extremely significant, and globalisation is the reason it’s been so successful in reducing poverty domestically and growing so rapidly.
As it reaches higher levels of income, the composition of what it exports is changing. It is no longer a low-cost manufacturing centre. Increasingly, its economy is comprised of more value-added, technologically advanced products and more services. That’s good, because it reflects the structural and demographic changes in the economy.
Other countries will benefit because they will become low-cost manufacturing centres: India, Bangladesh, Vietnam, Cambodia and others. But more low-cost manufacturing and services are being done by automation. With automated services, there will be no call centres in the future. Administrative offices will be all digital. Robotic equipment is doing a lot of repetitive manufacturing tasks. So the ability of countries to benefit like China did will be slower and different.
China was lucky that it was able to develop from an unskilled, low-paid workforce to a higher-skill, better-paid one at a time when there was still a big need for low-skilled labour and repetitive work. But with automation, that will not be the case in the future.
China does not seem to be in a position to totally transform from a manufacturing powerhouse to a service-centred one. Do you think it will follow a different path in climbing up the ladder of the value chain compared with other advanced economies?
There will still be manufacturing in China, but it will be very different compared to the past. It needs to be more value-added, more automated, more technological, with more robotics. And so the question of what humans will do in manufacturing compared to what machines will do will change in big ways. Advances in artificial intelligence (AI) and robotics are accelerating that change. So there will be manufacturing. But the question is, what type of manufacturing?
As automation advances, it’s the price of skilled labour and the price of capital that become more important than that of low-cost labour, because machines are capital. This becomes very important in determining where high-value-added manufacturing locates. So if China wants to compete, it needs to make sure it has available skilled labour and cheap capital, with lots of investment. And increasingly it will be for Asian markets and the domestic market, not for export to the US.
The US is going to become a smaller and smaller share of ... the global economy ... for the rest of the world, this could lead to an acceleration of integration
Firstly, what Trump is doing is unpredictable. It’s very bad for the US economy. The worst effects will be felt in the US in the medium term. It will lead to inflation, a slower reduction in interest rates and slower growth. Higher prices will also be bad for poor people. It will increase the cost of imports, and poorer people pay a bigger share of their income on these imported products. So it will increase inequality in the US. It’s also pushing down the dollar and consumer confidence, reducing investment.
For the rest of the world, we will see the implications of this in less reliance on supply chains that are integrated with the US. That means there will be a diversion to other markets. Asia will become more integrated. China will stimulate demand domestically and rely more on the domestic market. Europe will look increasingly to Asia rather than to the US for trade, investment and technology.
So I think the US is going to become a smaller and smaller share of global supply chains, of global value-added investment, global trade and the global economy. But far from slowing down in the medium term, for the rest of the world, this could lead to an acceleration of integration.
A lot depends on the responses of other countries, but I hope that China and India and other countries – while they have every right to have “reciprocal tariffs” with the US if the US unilaterally raises tariffs – it’s very important that they don’t do that to other countries. If anything, they should reduce tariffs and stimulate trade. We could see a situation where there are lower tariffs for the rest of the world if countries decide to go down that path.
I think it’s important to understand that it’s serious, it’s unpredictable, and it’s the direction of travel. At least for the next four years, it means that the US cannot be a reliable partner in anything. That will increase the need for diversification away from the US.
But it’s important that the fundamentals remain central and the other countries reinforce their commitment to a safe and sustainable world. In other words, commitment to a rule-based trade system, multilateralism, net zero on climate, the World Health Organization and stopping pandemics; these things need to be reinforced.
To reduce global poverty, slow climate change and reduce conflicts, pandemics and other risks, the rest of the world needs to emerge stronger as a result of this test. China and other countries – China can show leadership – should demonstrate that what the US is doing is not going to change their behaviour, because solving global problems is necessary for the benefit of all humanity. This is not only for the world, but for China’s future. China has learned it needs to stop pandemics. China knows it’s got to do what it can to slow climate change. China knows that it’s got to protect intellectual property, because it’s now the biggest producer of intellectual property in the world. China knows that it’s got to work with other countries to address big shared problems.
It’s important that in this process, with the US tariff escalation and lack of coordination and cooperation, everyone else’s commitment to address shared problems is reinforced. And this will compensate to some extent for the US withdrawal. And hopefully, at some point in the future, the US will come back to play its part in solving our common world problems.
Europe needs to recognise that Asia is half the world’s economy and growing rapidly – at 5 per cent annually. Europe is not growing its share of the world economy, and the US won’t either. To develop the European economy, with trade and investment, technology transfers and to create a safe and sustainable world, Europe needs to cooperate with Asia.
Within Asia, China and India are the most important countries. China is much richer than India, and China is overcoming extreme poverty, but it’s also very vulnerable to pandemics and climate change. So my hope is that China will have the willingness to work together with Europe. India is also very important to work with, to build, to reform, to improve the international system, even if the US is not part of it.
We saw the US insist that Europe not use Huawei Technologies equipment. It hasn’t stopped Huawei, because the market is global for these products and services; it’s not just Europe. Forcing European countries to take sides has accelerated the loss of US soft power.
In a way, Trump is pushing Europe towards Asia and towards China. The Trump administration kept saying, “We cannot keep bailing Europe out.” It’s a real misunderstanding of how the world works. We are an interconnected, entangled world.
The US should have learned from the financial crisis and the pandemic that we are interdependent, that the safety of Europe is the safety of the US, and that a thriving world order – reducing the threat of climate change, of pandemics and of conflicts in Europe and elsewhere – is good for the US, not just for other people.
Greater global risks put the lives of the people in the US at risk. For example, the undermining of the World Health Organization increases the potential for pandemics and diseases to come to the US.
The Belt and Road Initiative is an important, positive development. The criticisms have tended to pick up on some things. All big projects have risks associated with them. They all have the potential to be more costly than expected. There’s a big issue of how you pay for them, the debt and the amount of money they cost.
In my view, we should accept that there are some problems that need to be resolved by analysis on a case-by-case basis, by working with other institutions like the World Bank or the Asian Infrastructure Investment Bank to resolve and improve them.
But the massive transfer of resources and technical know-how from China to more countries is a good thing. And it’s something that the US and Europe have done in the past. It’s just that now someone else is doing it, and at a higher volume. And so there’s some anxiety around that.
The Belt and Road Initiative is also one of the reasons I think what’s happening in the US will not affect China as badly as it would have 10 or 20 years ago. The US as a share of Chinese trade or investment is much lower because many of the Belt and Road Initiative countries, which China has been supporting, have done very well.
The challenges facing it, in terms of growth, are mainly internal. In terms of risk, they are mainly external, pandemics and climate change and other shocks. But the internal one is the transition from manufacturing, low-cost labour to a high-skilled, high-value-added, technological and scientific society. That is a transition that needs to be carefully managed, as it has many implications.
One is that the new jobs are in different places compared to the old jobs. So where people live and how they get affordable housing is a big question.
The second is that it’s happening at the same time as a demographic transition. China is ageing rapidly. The workforce is contracting rapidly. That means there needs to be a transformation of public finances, and that includes rethinking retirement ages.
The retirement age for women is even lower than the one for men in China, even though the life expectancy of women is longer. So the retirement age for women should be increased, maybe to a level similar to that of men, because people are healthier for much longer. And AI is going to accelerate that improvement in health.
At the same time, there needs to be a stimulation of domestic demand, because there’s a lot of youth unemployment. China can and should afford to increase demand, consumption and social welfare, with higher pensions and better distribution to support people in need.
China is growing at 5 per cent. This is still very high by global historical standards. Europe has never grown at 5 per cent. The US has never grown at 5 per cent on a sustainable basis. You read the Western media and think there’s a crisis in China because it’s only growing at 5 per cent – it used to grow at 12 per cent or 10 per cent. Now it’s only growing at five. I wish we had that “crisis” in the UK and Europe. We can’t even grow at 2 per cent.
And now China has negative population growth, which means that every increase in income is an increase in per capita income. This is very different from India or other countries that are growing fast, because there’s also population growth in most other high-growth countries. So it’s very important to place the challenges that China faces in a historical and global perspective. And when you look at it that way, then the challenges are not so big.
A lot of people compare what China is experiencing now to Japan in the 1990s, given the demographic crisis and US containment efforts.
Japan was able to get rich before it got old. Japan is still a rich country, where people’s living standards are high and life expectancy is high. The economy grows slowly, but it’s already at a high level. The question for China is, will it be old before it is rich?
I think that technology and AI are changing this narrative. The idea was that you need lots of young workers to support an elderly population to generate GDP growth to get rich. And when Japan got richer, people only had a relatively short life expectancy at first, but now life expectancy has improved dramatically.
So there are two things China needs to do. One is ensuring that automation, AI and other changes increase the productivity of the workforce. Increasing productivity through investment is important, so that you can support an older population.
And the second is to make older people more productive. I mentioned the retirement age as one aspect of that, and also health. There’s life expectancy and there’s healthy life expectancy. How much do elderly people depend on care, on hospitals, on other people when they are old? Exercise, social integration, not being isolated, not being lonely – these things are important.
Particularly in countries where you have few children to interact with, a lot of older people are lonely. Women’s life expectancy is greater than men’s. Women often look after sick men, and they are lonely. This is not good for societies.
Less smoking, less drinking, more exercise – much can be done. And the wealth of the country can increase even as it ages. This is different from the past, where ageing meant slowing down growth. This is not necessarily the case now and in the future, mainly because of growing awareness of what needs to be done to have longer, healthier lives.
Japan, as it got richer and older, lost its competitiveness. The US also contained Japanese exports that were seen to compete with its manufacturing. I don’t think the US can contain China now. The world of the 2020s or 2030s is very different from the world of the 1990s and before. Because of the success of globalisation, the rest of Asia is so much bigger. The rest of the world is so much bigger. In that world, there was a Group of One country, the US. The US is less and less that G1 country.
One of the things China needs to do is make foreign investment in China easier. Trading shares in Chinese stocks is still very difficult, though you can do it through Hong Kong. If you look at the size of the various economies of the world, and you look at people’s investment in stock exchanges, the US has something like 70 per cent of global investment in stock exchanges, even though it’s only 20 per cent of the world economy. And China, which is also about 20 per cent of the world economy, has a tiny share of world stocks that are internationally traded.
Everyone, including me, wants to invest in China, but we can’t do it very easily. This is part of the transition path for meeting the challenges. More capital is good in the market, and it needs to be managed to reduce the risks of instability. But improving the liquidity of China’s capital market is part of what is necessary in the medium term.
Scientists increasingly are reluctant to go to a conference in the US ... A lot of Europeans and people from elsewhere are having their visas cancelled or leaving ... All of this will slow US growth
It’s not working. In some areas, it made it more difficult for China. For example, [AI start-up] DeepSeek used Nvidia chips, which they got before Nvidia was stopped from exporting [those units] to China.
So the question now is, how long will it take for China to develop its own competitive chips with the same capabilities?
If you look at the number of scientists, engineers, patents and other manifestations, what’s been noticeable is the originality of the patents generated by China is growing rapidly. There was a time when they were copycats, or they were more about diffusion or amplification of technologies and less about the creation of new technologies. What we are seeing now through patent numbers shows that China is becoming more innovative, including in fundamental improvements in technologies.
What we are also seeing is much more collaboration. Across China, with Europe, with the rest of Asia. This is collaboration that leads to breakthroughs. Of course, there is also a need for a lot more money.
The Chinese government’s investment in research and development, in higher education, is going up. And in the US, there are cuts to research and development budgets. The US has cut funding for the National Institutes of Health. It is also cutting university funding and restricting collaboration.
Scientists increasingly are reluctant to go to a conference in the US because there are issues with visas, and they’re getting stopped at the border since Trump’s second term. There are also a lot of Europeans and people from elsewhere in the world who went to work in the US who are either having their visas cancelled or leaving because they don’t feel welcome.
Some US scientists, because a lot of budgets have been cut, are also leaving. And so Europe is on a big recruitment drive for scientists from the US. All of this will slow US growth and accelerate growth elsewhere.
In the past, China could rely on many hundreds of millions of people coming out of the countryside to work in urban areas and in manufacturing. That is drying up.
AI can do many things to increase productivity, but it won’t do every job - in particular, jobs that wiser, older, more experienced and skilled people will be doing.
For China to get rich, it requires a bigger share of its population to be productive, contributing taxes and other resources. And when these people get old, they’ll receive more back – their pensions must be bigger.
Yes, definitely, there’s no question in my mind. The largest economy, the US, is growing at 2 per cent and it is damaging itself now. And the second largest is the Chinese economy, growing at 5 per cent, which is sustainable and getting very close to the US on some measures.
In terms of purchasing power parity, China is already the biggest economy. In nominal exchange rates, it will definitely be the biggest economy.
The question is when. I think China could be the biggest economy in the next 10 years. It depends in part on how badly the US damages itself. But I hope they surprise me by growing quickly, because it will be good for the world economy.
So what China needs to do now is structural transformation domestically to accelerate growth, including having more high-value manufacturing, less dependence on low-value exports and more investment in science. That’s what is happening. It also needs to do some thinking on its labour markets and wealth redistribution, which will help lift demand, lift consumption and accelerate growth.