The Future of China’s Development and Globalization: A View from Poland

My first personal recollection of China as global manufacturer and international trading actor goes as far back as the beginning of 1980s when I bought a “Hero”—brand fountain pen produced in Shanghai. For a young college student from a provincial city in communist Poland, it was something magical. It was amazing that I was using a nice gadget designed and produced thousands of kilometers away in a country that I’d only heard of in geography and history class. At that time, black tea and cheap flashlights were the only other proofs of China’s existence. However, reality can changes very quickly. Initially unsophisticated Chinese products were replaced by a wave of garments, initially of low quality, followed by top clothing brands and electronic devices with small, hidden geographical hints: “Made in China”. Today, high-end Chinese products proudly stating their country of origin have now become a part of everyday life.

This incredible evolution from fountain pens and black tea to cutting edge IT products happened in the span of a single human lifetime and is reflected in global trade statistics. In 1980, China’s share of global merchandise exports hovered around 1.0%, and in 2021 it was already 15.07%. China took advantage of globalization and made good use of it to increase the wealth of its citizens, build infrastructure, and develop research capabilities. It benefited China’s economic partners as well. The question was, could it maintain this pace over the long-term?

Today this question is rather more academic than practical. The globalization that we were familiar with still a few years ago belongs to the past and the turning point came in two waves: the COVID-19 pandemic and a series of political earthquakes which culminated in Russian aggression against Ukraine. These events belonged to different realms—global health and international politics, respectively—and they had different impacts on our lives. However, despite many dissimilarities, they shared at least one common trait as they revealed the complexity of interdependencies which emerged from globalization.

Already well before 2020, governments of some countries, including China, came to the conclusion that the globalization, which had spurred economic growth in recent decades, did not offer sufficient protection against critical shocks resulting from excessive cooperation with international partners. This discovery prompted them to look for alternative solutions and finally led to including a transition to a policy of increased self-reliance. A very good example of this approach was the “Made in China 2025” program launched by the Chinese government as early as 2015.

The outbreak of the COVID-19 pandemic, followed by intensified international tensions, only reinforced this trend. In 2022, President Xi Jinping had good reason to say that one of China’s key goals was to “accelerate the realization of high-level scientific and technological self-reliance and self-improvement.” Many other leaders echoed similar words.

Is this good or bad? A lot depends on the language we use to describe this phenomenon. Words such as “decoupling” or “protectionism” can have a negative tone, which is unnecessary. Nobody should feel offended by ongoing changes; they are real, and the word “adjustment” renders their meaning much better. The more complex question is what will be the long-term consequences of these “adjustments”?

Quite often, these situations are considered in terms of a zero sum game. This may be the case sometimes, but the current situation is different. This adjustment should be seen as a natural reaction to the shocks that the world has been experiencing over last few years. By definition, adjustment is future oriented and opens a new chapter in the contemporary social and economic history of the world by making development more resilient in the face of geopolitical, health, and climate threats.

It is very likely that this new social and economic environment will be characterized by a more equal distribution of manufacturing potential and more differentiated logistic chains on a global scale. Countries and companies will work to reduce dependencies, and one can imagine that new important actors will emerge, especially among Global South countries, in South East Asia, Africa, Latin America. In the decade from 2011 to 2021, China’s contribution accounted for 33.4% of all global economic growth, while Africa and ASEAN countries contributed 3.7% and 8.4%, respectively. However, sooner or later, all these great regions will claim a new place in global distribution of economic potential. If considered as a single entity, ASEAN is the third largest economy in Asia, and the fifth largest in the world after the USA, China, Japan, and Germany. We cannot discount the fact that the relocation of some industrial sectors to these areas will boost future economic growth. This does not mean, however, that this process will necessarily happen at the expense of China. If global economic growth continues, China’s revenues from trade and manufacturing should also keep growing even if its share in the global economy plateaus or contracts.

To better asses the opportunities and challenges that China will face in the future due to adjustments made to global economic cooperation mechanisms, it may be interesting to look at its relations with other countries. Poland may serve as a good example in this context. Both countries have maintained complex and multifaceted economic exchanges that date back to 1950. In 2021, their bilateral trade turnover exceeded 53.6 billion USD with a huge 47 billion USD surplus on the Chinese side. The majority of Polish products exported to China in 2021 were copper ore and copper products, wood, car parts and accessories, converters, textiles, machinery, and dairy products. This list of exports is neither long nor diversified, but at the same time Polish industry has gained international recognition in such sectors as furniture, green technologies, the gaming industry, yachts and recreational boats, biotech, nanotech and pharma, medical devices and services, food and agriculture, mobility, cosmetics, fashion, and tourism. Clearly, there is a great deal of unexploited potential in the Polish–Chinese trade, particularly if it becomes more balanced and less unilateral.

Polish–Chinese investment is another interesting field to look at. For decades, it remained stagnant despite the fast economic growth of both countries. Recently, however, it has gained momentum, and efforts have resulted in milestones that echo historical achievements like the founding in 1951 of the first joint Chinese—foreign company. Chipolbrok, a Polish–Chinese shipping joint venture that boasts registry number “1” in China, celebrated its 70th anniversary in 2021 and remains a source of inspiration for all those who dream of promoting business between our countries. For the time being, the share of Chinese investors in Poland make up a small part of overall foreign investment and in 2019 accounted only for 3.15% of the total investment that year, mainly focusing on acquisitions of existing enterprises and mergers. Polish investment in China also remains low.

For years, Poland has been ranked very high among Central and Eastern European countries in terms of its attractiveness to investment. In 2021, Poland moved into third place in the European Union and 14th in the world in terms of the inflow of foreign direct investments with the value of 24.8 billion USD (an 82% rise year-on-year and 86% compared to 2019). Within the European Union, only Germany and Sweden showed higher inflows. The number of greenfield investment projects amounted to 423 (11% growth year-to-year) ranking fourth in Europe and sixth in the world. Foreign investors appreciate Poland’s stable economic growth, strong domestic demand, geographical and logistic proximity to other European markets, highly qualified and hardworking labour force, improving infrastructure as well as number of different investment incentives.

The economic development of Poland and the evolution of its industries have created great opportunities especially in electro mobility, including the production of electric cars batteries; electronics (production sites as well as R&D centres); renewable sources of energy; and logistics, including e-commerce warehouses and logistics centres.

The above overview of trade and investment between Poland and China suggests that there is considerable room for further growth and even at a time of global economic adjustment, both sides can benefit from deeper ties. Achieving this result, however, should not be taken for granted. The need for a change in how China works with countries like Poland seems to be eminent. A new model for cooperation should be more reciprocal and inclusive. In the long-run, economic relations founded on the assumption that one side produces and another side buys are not sustainable. To avoid a stalemate and unlock the untapped potential of economic cooperation, more attention should be paid to the following issues:

First, a level playing field and market access. Unbalanced trade remains the main challenge in our bilateral relations as well as EU–China relations. The Chinese market remains closed to many foreign goods and services. There is a need to provide the same opportunities for foreign and Chinese companies. Today, the latter enjoy more rights than their foreign competitors (public procurement is a good example) and have access to controversial state support mechanisms. Keeping one fifth of the global economy partly locked and partly open will have negative consequences worldwide.

Third, credibility. If we want to advance or even to maintain our cooperation in the future, mutual trust is needed. This is the cornerstone of any cooperative relationship. If we face a deficit of mutual trust, then the political framework, all bilateral and multilateral meetings, become meaningless. In the case of relations between Poland and China we are very close to this point.

Fourth, geopolitics. Many believed this concept had become obsolete, but today it is back. It can be clearly seen in the case of rail freight between China and Europe. In 2015, 18,900 containers passed through Malaszewicze—a border crossing between Poland and Belarus, and the biggest railway terminal along the EU border; in 2021 this number grew to 227,000. However, this may not be sustainable. Based on border data from Malaszewicze, the projected volume of containers transported from China to EU plummeted 25% year-on-year in April 2022. This is mainly due to the impact of the Russian war in Ukraine, which have forced some producers and exporters to redirect their containers from rail to sea routes due to possible risks of border closure, sanctions, and the rising costs of insurance.

Unfortunately, geopolitics has broader implications for economic cooperation than just the flow of goods through a railway border crossing point, even if it is the biggest one in Europe. It is about understanding the basic rules of international relations, including territorial integrity, non-use of force, non-interference in domestic affairs, and respect of sovereignty. It is clear that differences of opinion in this area between European countries, including Poland, and China, particularly in the case of Russian aggression against Ukraine, do not contribute to better trade and investment climate. On the contrary, they foster distrust and lack of confidence in the logic of economic development. Therefore, while speaking about trade and investment, we must keep in mind that respect for UN Charter principles an essential precondition for a safe and stable international economic environment, where globalization was born.

It is hard to underestimate China’s potential contribution to the redefinition of globalization. If China takes the current trend of economic adjustment as an opportunity to improve its economic relations with foreign partners and becomes more open and reciprocal in its policies, it will benefit the world and itself. It will play a pivotal role in the global post-pandemic recovery and bring economic cooperation a new level on par with its “high quality development” formula. If the focus is to defend old positions, we can expect only more tension and disruption, which will have negative consequences all over the world.