China's impact on the global economy

I write this as the conflict between China and the West increases, involving in particular its role in world trade. This development could have consequences for Pakistan which I will take up in a later article. Today my focus will be on global issues.

Xi Jinping, now on his way to becoming one of longest serving supreme leaders of China, is determined to bring about massive change. If he had his way, the Chinese system would work very differently and the country's relations with the world outside would also be recrafted. In the spring of 2023, he would have assumed the presidency for another five years — having completed two terms already in this office. His term as the Chairman of the Party's Military Commission would be renewed, again for the third time and he will be reappointed for the third time the country's president. Although the world prefers to call him President Xi Jinping, it is the first two positions from which he draws all his power. He needed to do a great deal of work at home to consolidate his hold over the process of decision making. He did that facing and overcoming two major challenges.

The first is what the Chinese call the "zero-Covid," an approach which aimed to reduce deaths and serious illnesses to zero from the virus the medical community calls Covid-19. The virus was first discerned in the industrial city of Wuhan on the left bank of the Yangtze River as it flowed towards the Pacific Ocean. Wuhan has a world recognised health research centre which specialises in the study of viruses. For some time, experts believed that the virus somehow escaped the laboratory while scientists were working in changing the organism in order to understand how it affected the human body and how it could be controlled once it had its way by beating the immune system. Donald Trump, the United States president at the time the virus was discovered, held the Chinese authorities responsible for its spread. To make his point, he began to refer to the virus as the China virus and the Wuhan virus.

His statements on the virus increased the anti-China sentiment in the country, especially among his supporters. There were physical assaults on several people with Chinese or East Asian features. However, the research done on the origin of the virus by several teams of scholars came to the conclusion that the virus was carried by live animals when they were sold for food in what was called the city's "wet market." Having used draconian measures that included shutting down cities and banning all travel, the Chinese were able to control the spread of the virus in their country. This was the approach adopted by the Secretary General of the Shanghai Communist Party who shut the city down and severely restricted contact among people. This led to severe damage to the economy of Shanghai and also had global economic consequences. But the virus did not go away and affected the health of the people in many large cities.

After the Chinese had taken control of the situation, they began to focus on developing their economy. This was done by focusing on technological improvements. This was achieved using the near monopoly of China on the mining and developments of what are called "rare earth" minerals. These metals are used in making magnets that are essential components of electric cars, aero planes, computers and voracious kinds of domestic products.

As Jeanna Smialek reported in her contribution to The New York Times published by the newspaper on November 19, 2025, "European governments are racing to rearm their militaries as they face up to a more aggressive Russia and an increasingly isolationist America. But that push must overcome a formidable roadblock in the shape of China's restrictions on critical minerals. Beijing has welded this leverage in its tread wars with Washington and Brussels, tightening or loosing export controls on rare earths in negotiations over tariffs and other traded barriers."

By the end of the year 2025, the China would have overtaken the United States in several technical area as its economy has grown in size and sophistication. What worries Trump's Washington is the investment Beijing is making in expanding its military.

It was in the thirtieth global climate summit held in a town in Brazil on the edge of the Amazon Rainforest that China showed its might. While the Americans stayed away from the meeting, the Chinese sent in a large delegation which arrived at the site of the summit in a convoy of electric vehicles made in China. The electric cars, buses and trucks that brought the Chinese to the town in Brazil were now important items of exports from the country. China was reaching out to the world several other ways. One of these ways had tied Pakistan close to China.

I got a first-hand impression of the Chinese interest in Pakistan when I was finishing my near eight-year tenure as the head of the World Bank's operations in the country. I was called into the office of the then prime minister of China to ask for help in getting Pakistan involved in the system of roads and railways they wanted to build to connect the western part of the country to the sea. Beijing had reached out to Pakistan through its ambassador in Islamabad but got no response. They were aware of my close relations with then President of Pakistan, Ghulam Ishaq Khan, GIK. At their suggestion I went to see the president who was enthusiastic about the Chinese interest in using the Pakistani territory to get to the Arabian Sea.

Pakistan's wish to partner with China was to result in the multi-billion global project the Chinese were to call the Belt and Road Initiative, or BRI. The first part of BRI was to be the China-Pakistan Economic Corridor, or CPEC. China and Pakistan have now launched the second phase of the SPEC which would connect it through Pakistan with resource-rich Afghanistan and the Central Asian 'Stans'.

The result of this extension will be to link China with Central Asia and then that region would provide Beijing land access to Europe. It is this development that has brought the United States back to Pakistan. Islamabad should keep this in mind as it works out a new relationship with Donald Trump's Washington.