Exploring China’s Economic Hegemony and Its Global Significance

Introduction

An essential characteristic of an efficient economy is the interplay of competing firms in a marketplace. This thriving competition is what makes an economy well-ordered and functional. Market Power is essentially when a certain entity holds immense power over the market, can influence the price, demand, and supply of goods and services, and is also a significant stakeholder in the industry. It can also refer to a situation wherein an entity becomes so rooted in an economy that it becomes unavoidable for people despite the wrongful actions of such an entity. It means that the firm is no longer a choice for the people, and neither does the public support for them matters; they are now an imposition upon the people they cannot escape. One such example is China, a socioeconomic powerhouse.

The write-up will generally discuss the immense Market Power China has built over the years, the reasons behind that power, the implications the global economy faces when a single nation holds such an influence, and how such a phenomenon can become a global caveat for other international developments.

Analysis

Why does China hold such an immense power?

China has had a policy towards the corporate world that provides an incubator for businesses to flourish. The catalyst for the growth is the enormous, hard-working population filled with a Nationalistic identity regulated by a single super-powerful central authority. The authorities are usually in the process of eliminating all the institutes that serve as a caveat for economic growth. The existence of a single Trade Union that is under the influence of the Authorities and the lax implementation of the labour laws is a sheer example of this.

The labour, electricity, and other elements are relatively cheaper, facilitating the firms to produce goods and services at a significantly lower price. Moreover, they produce goods in huge quantities, which in turn even lessens their cost; this has made them a global leader in goods and services.

They are the major suppliers of electrical goods, industrial-grade machinery, and other capital goods with a worldwide consumer base. China’s industrial goods are one of the cheapest and very difficult to compete.

Moreover, China has humongous Foreign Investments in nations across the globe and has shares in numerous commercial ongoing projects. Moreover, many small economies, especially African countries, are in massive debt to the Chinese Government, which places China in a significantly dominant position over its African counterparts.

Also, due to its vast population, it serves as a huge consumer market for international business houses. Companies varying from Volkswagen to Starbucks now have a massive demand in China, contributing significantly to their revenue.

This has led to China being a Global Economic Leader, holding a strategic position in the world economy and an influential role for other major and emerging economies.

The implication of the Power China holds

China, owning such an omnipresent power, often mistreats it. Due to its huge influence, it continuously exploits emerging economies and adopts a modern-day imperialist approach with expansionist tendencies resembling the East India Company. The smaller economies have been leveraged through loans for commercial developments, leading to Chinese Dominance in their markets and, hence, more power and, therefore, more domination, leading to a debt spiral. The Sri Lanka Hambantota Port and other such African projects are visible instances of this matter. Its influence also provides it with leverage over countries to enter biased contracts.

Secondly, China contributes a huge amount to the global economy and forms such a crucial part that its trade and internal policies impact the world. The decline in steel prices in China implies the global steel market is in a depression. That is the power it holds, and the steel sector is just a segment of that; there are a number of other crucial industries where China plays such a big game.

Moreover, the already militarily strong Chinese have now got the backing of a significant economic institution, which has added to its power to invade and combat. The continuous threats being posed to Taiwan are the consequences of this phenomenon.

China’s continuous attempts to invade Arunachal Pradesh, India, can also be linked to the aforementioned power. It is under a protracted process to consider many other provinces to be its territory. The Taiwan issue is one such instance.

The most intriguing fact is the international response to such activities. There have been numerous instances in the past wherein countries have been aggressive towards others, persecuted their people, and cultivated terrorism on their land. Still, such actions have always been followed by a stringent backlash from the Global Community regarding economic sanctions and other follow-ups. From the Iraqi context to Russia and Ukraine, aggressors have faced consequences. But on the other hand, the Chinese have yet to be met with such consequences.

Minimal market sanctions are imposed, no military actions are taken, and rather, the Chinese are the ones who register a protest when someone voices their genuine concerns. It is suggested that India can only boycott 30% of the Chinese Imports and substitute them, but 70% of the imports are inevitable for this point in time. India may take a decade to create an ecosystem that can substitute Chinese goods. There have been instances in the past wherein India has banned imports of goods that it can produce. It is under the process of banning imports of weapons that can be substituted locally, but the reluctance of such an action on Chinese goods depicts the sheer helplessness and dependence that the Indian Economy Faces in front of the Red Dragon. China’s pricing and quantity of goods are challenging to compete with.

But due to its immense power, China is also one of the very few economies that coped with the adverse circumstances posed for the Global economy since Covid and followed by the Russia-Ukraine war. It was the only large economy with recorded growth during the Covid year. Due to its ability to cope with such adverse conditions, the world could meet its supply chain.

Conclusion

The Chinese instance is a perfect example of Market Power and how certain factors can make some entity so powerful that it becomes a thing above the market. The recent Chinese actions and negligible follow-ups from the international community display how the Market Power has posed China in such a position that Chinese goods and services are now inescapable for people around the globe. Its internal policies, supply, and other circumstances in China, in a way, define the global economy. The global supply of certain commodities is essentially on the whims and fancies of the Chinese Business houses and leaders. The recent Global events have created a more biased playing field favouring the Chinese. Due to an already prevailing recession condition in the market, no country can tackle Chinese dominance, as the supply chain is affected, and without China, the global supply chain will be in shambles.

Therefore, the aforementioned arguments demonstrate how Market Power works in the Global economy. How can Market Power at such a humungous level affect Global economic dynamics, and even its wrongful actions, go without any stringent backlashes, and gradually, the Economic Power slides into becoming a Social Powerhouse as well? But such great power also has its advantages, which can be felt during hard times when such powerhouses level up to run the whole globe, as these are the ones with the maximum resistance to combat such hard times. It also leads us to observe that Market Power leads to Economic implications and affects the dynamics beyond economics.

Author: L. J. Goyal

The author is pursuing a B.A. L.L.B. (Hons) programme at Nalsar University of Law, Hyderabad

(Views are personal)