CHINA & IPE

What is the effect of the rapid economic development of China on the global political economy?



What is the effect of the rapid economic development of China on the global political economy?

Background Information

Post Great Depression and World War II majority of the world got paralyzed, and financial systems got crippled. US (United States) want to establish its economy, which was not possible without the support of the countries, which were the trading partners. Therefore in 1944 US in coalition with United Kingdom proposed Bretton Woods agreement, which stated that all currencies would be pegged with the currency of US and the dollar would be backed by gold reserves (Stephey, 2008). Marshall Plan got introduced in Europe in 1947 to stimulate the growth and development because Europe got severely affected by the World War II, and US wants to revive European market so that they could purchase goods manufactured in US. A recourse plan got introduced in Japan by the US, so that Japan can transform to free market economy and can be of example to the other communist regimes in the region including China and Russia (Charoensri, 2010, pp. 3). IMF (International Monetary Fund) got also formed in order to regulate the global financial architecture and to correct any discrepancies arising. The main purpose of IMF is to grant loans to developing nations and then dictate them the terms and conditions according to the policies of the US. As a result, US made allies against the communist countries and maintained its dominance as a superpower in the world. The era of Cold-War started US and their allies starting free trade amongst themselves. Late in 1960s Japan and Europe outperformed in terms of trade and piled up reserves of dollars which resulted in more printing of dollars and inflation in America. Another problem, which also surfaced was that the gold reserves were not enough to back the dollar US had created in the meantime. US dominance was at its peak when President Nixon decoupled the dollar with gold and free floating of all the currencies had started, and that was the point when the dominance got transferred to other regions mainly Middle East (Stephey, 2008).

Introduction

In this world, it is difficult for a country to sustain as a recluse without maintaining any relations with any of the other countries. Countries are dependent upon each other in terms of a give and take relationship that is an import and exports. The political and economic policies they make affect the trading countries directly and indirectly. When International Politics and International Economics start working together, it forms International Political Economy or Global Political economy (Veseth, 2012, pp. 1-2). Through this by which entrepreneurs and governments work together to form policies and take initiatives which are the best for their country and best for individual entrepreneurs or organizations. When they come into conflict, then the results can negative. Countries then sit together and form sustainable financial and economic ...