In the 21st century, the ‘rise of China’ in the post-financial crisis period is arguably the most important and widely debated topic in politics and international studies. Since, the 2008 financial crisis, compared with the US, whose power appears to have diminished, it seems more and more likely that China will soon become the engine of the world economy and, perhaps, one day the global hegemon. Although the financial crisis may have not, in itself, fundamentally changed the shape of the global order, it has arguably altered perceptions. This is especially so regarding the ‘global imbalances’ that are said to have provided the macro-economic conditions for the crisis to occur. Equally, the different positions occupied by the US - as the world’s largest debtor - and China - as the world’s largest creditor - both prior to and after the crisis are suggestive of a fundamental power shift in the global order. In this thesis, I aim to add to existing understandings of the rise of China by examining the relationship between its rise and the global imbalances in the contemporary order.
In order to address my thesis questions, I utilise concepts and arguments about the relationship between power, institutions and the global order provided by different scholars and theoretical traditions in IPE. Based on these, I review the experiences of Britain and the US in three key historical periods of global imbalance in 19th and 20th centuries that are analogous to the role of China in the contemporary global imbalances. Specifically, I highlight the interaction between China’s ‘internal’ imbalances and external pressures in the post-crisis era, and explore the different influences of these in the rebalancing efforts of China’s with respect to its economic reform process. Overall, I argue that, although China is often caricatured as a ‘free-rider’ and beneficiary of the global imbalances, this neglects China’s serious internal problems caused by these imbalances due to its trade-oriented and investment-oriented economic model. I suggest that one of the central pillars of China’s rebalancing efforts in post-crisis is the economic restructuring through its new so-called Pilot Free Trade Zones (PFTZs), which represent a reform laboratory similar to the role of the Special Economic Zones (SEZs) in the 1980s and 1990s. As such, I provide a review and assessment of the PFTZs and use this to gauge China’s changing role in the global economic order.
