Cambridge Review of International Affairs

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The rise of China and its impact on world

economicstratification and re-stratification

Xing Li

To cite this article: Xing Li (2020): The rise of China and its impact on world
economicstratification and re-stratification, Cambridge Review of International Affairs, DOI:
10.1080/09557571.2020.1800589

To link to this article: https://doi.org/10.1080/09557571.2020.1800589

Published online: 11 Aug 2020.

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Cambridge Review of International Affairs, 2020
https://doi.org/10.1080/09557571.2020.1800589

The rise of China and its impact on world

economicstratification and re-stratification

Xing Li
Aalborg University

Abstract The article provides a framework for understanding the historical trajectory
of China’s rise and its impact on the conventional stratification of the capitalist world-
economy of the core, semi-periphery and periphery. Inspired by World-System Theory,
the author analyses the process through which China’s global economic rise is
challenging the status quo of the world-economy’s established structure. In other
words, China’s economic rise is modifying the ‘classical’ stratification of the world
economic zones as conceptualised by World-System Theory in terms of the core, semi-
peripheral and peripheral relationships and in terms of the composition and
proportional size of the three economic zones. As a result, the conventional
stratification of a small core, a scattered larger semi-periphery and a vast periphery is
being altered. The article goes through China’s different positions in the world’s
economic stratification during different periods, and concludes that the global
transformations led by China’s economic rise is leading the world towards a regional
and global re-division of labour, which is exerting a great deal of impact on both the
Global North and the Global South in terms of opportunities and challenges.

Nations’ positions and global stratifications in retrospect

Our existing world order, with an established structure of economic stratifica-
tion and division of labour, is based on a capitalist mode of production and is
driven by the law of value—capitalist accumulation and surplus pursuit. This
order was historically derived from Europe, where political, economic and cul-
tural processes interacted to shape and reshape the socio-economic environ-
ment in the evolution of market capitalism.
Europe’s overseas imperialist expansion from the 16th century onwards
began with market and resource conquests and trading relationships, which
resulted in the global extension of the capitalist system of production. The
development of the capitalist world-economy was realised through three his-
torical phases: a merchant phase of trade, an industrial phase of market expan-
sion, and an expansive phase of financial capitalism. Through the slave trade,
colonisation, ‘free trade’ and the world wars, the capitalist world-economy has
successfully absorbed multiple cultural systems into a single economic system.
Per critical theories, colonialism first planted the seed of unequal economic
and power relations between former colonies and former colonising nations,
leading to exploitation, social change and uneven development. Through colo-
nialism and imperialism, the world-economy has continuously incorporated
various parts of the world into its division of labour, within which countries

# 2020 Department of Politics and International Studies

2 Xing Li

are stratified into different ‘positions’ within the world-economy (Wallerstein

1974, 1979).
Wallerstein’s World-System Theory perceives the modern world-economy
as capitalist, characterised by a division of labour and flows of capital and
labour (Wallerstein 2004, 23). The world-economy is a dynamic and complex
system in which the division of labour divides production into ‘core-like’ and
‘peripheral’ products in relation to profitability (ibid., 28). The core-periphery
economic hierarchy is sustained with the privileged positions of some states in
controlling high-value and quasi-monopolised core-like products, and with
other states in an inferior position, producing low-value and competitive per-
ipheral products. Some states have a mix of core-like and peripheral products.
According to the above definitions, the economic positions of states in the con-
temporary world-economy can be stratified into three categories: (1) core
states, which are the developed and dominant capitalist states, such as the
United States (US) and its major Western allies; (2) semi-peripheral states,
which are strong developing states in between the core and peripheral states,
acting as the major source of both raw materials, commodities and manufac-
tured goods; and (3) peripheral states, which are the vast majority of less-
developed states with little industrialisation and with raw materials and com-
modities as their only source of economic survival.

Research inquiry and objective

What is the implication of a nation state’s particular position in the unified
world-economy, in terms of its development opportunities or constraints?
How do changes in a nation state’s position in a specific stratum of the world-
economy affect its development, in terms of the enlargement or reduction of
its ‘room for manoeuvre’ and mobility? More importantly, what impact results
from changes in a nation state’s position in the hierarchical stratification of the
world-economy on other nation states located in other strata?
With these questions in mind, this paper’s objective is to provide a frame-
work for understanding the capitalist world-economy’s dynamic characteris-
tics, which are reflected by a continuous movement of changes in strata and
position. The rise and fall of sizeable global economic powers implies not only
change of the major engine of world economic growth, but also a global eco-
nomic re-stratification. For example, Ikenberry (2004) identifies the positive
nexus between ‘American hegemony and East Asian order’ during the Cold
War, in which the US played a decisive role in the economic rise of East Asia,
as a clear example of upward mobility driven by an external player.
China’s positive contribution to world economic growth has been widely
covered for many years. Official figures show that already in 2012 China sur-
passed the US as the world’s biggest trading nation in terms of the sum of
imported and exported goods and the biggest trading partner for 124 countries
(China Briefing February 12, 2013). Economically, China has seemingly become
an alternative ‘indispensable country’ to the world-economy, a title the US had
enjoyed since the Second World War. Politically, the Chinese ‘state capitalism’
model and its increasing global presence poses a ‘hegemonic challenge’
(Davis 2018).
 The rise of China and its impact on world economicstratification and re-stratification 3

Conceptually, the author of this article sees China’s economic rise and the
changes of its economic stratification in the world-economy as both altering
the status quo of the world system’s established global ‘structural arrange-
ment’ (Strange 1988) and bringing about changes to other nations’ stratifica-
tion, especially those of the Global South. In other words, China’s rise has
indeed ‘disrupted’ the traditional distribution of economic power and wealth,
and the ways in which nation state positions are interrelated and shaped by
the arrangements or structures that have evolved to connect them. The article
uses the impact of the changes in China’s position within the world-economy’s
stratification to provide a framework for understanding the complex interplay
between China’s economic rise and the impact on countries located in different
stratifications: the core, semi-periphery and periphery.
After going through the article’s conceptual and theoretical analysis in con-
nection with empirical verifications on the nexus between China’s economic
rise and world economic stratification and re-stratification in different periods,
the article reaches a two-part conclusion:

1. The rise of China in the context of the current capitalist world-economy is

modifying the ‘classical’ stratification of the world-economy as
conceptualised by world system theory. Initially, the rise of China provided
peripheral countries in the Global South room for manoeuvre vis-a-vis the
core states of the Global North. But the closer China moves to core status
(such as ‘Made in China 2025’ and China’s technological advances), the
more its relationship with countries in the Global South is transformed into
a competition-driven and ‘unequal exchange’ relationship, not unlike
earlier North-South relations. Today, the impact of China’s rise on the
Global South is being increasingly orientated toward deindustrialisation,
imperialism, neo-colonialism (such as the discussion on China’s Belt and
Road Initiative and China-Africa and China-Latin America
economic relations).
2. Given China’s demographic size, its monopoly of the world’s semi-
peripheral stratum and the increasingly large share of its core status are
fundamentally affecting the basic tenets of World-System Theory; the
conventional stratification of a small core, a scattered larger semi-periphery
and a vast periphery will have to be reconsidered. This article implicitly
questions the contradictions and sustainability of the transformed three-
layer structure of the world economic order.

The theoretical inspiration

World-System Theory, developed by Wallerstein (1974, 1979, 1997, 2004), pro-
vides a broad theoretical perspective to understand the historical evolutions
and changes involved in the rise of the modern capitalist world-economy.
Concepts from world system theory inspired this article.
‘World-economy’ denotes the inter-state, inter-regional and transnational
division of labour. In other words, the modern world-economy is characterised
by a multi-state political structure (the interstate system) and an international
division of labour (a single unit composed of many mutually dependent parts).
This world-economy has extended over a long historical period and has
4 Xing Li

constantly brought different parts of the world into its division of labour. The
global division of labour has led to perpetual global stratification (in other
words, economic core-peripheral relations).
In the modern world-economy, the division of labour consists of three
zones (not countries) according to commodity value and industrial profit: core,
semi-periphery, and periphery. Countries tend to fall into one or another of
these interdependent zones. Large economies like Chinese and US economies
can inhabit multiple zones. Within the Chinese economy, different provinces
and regions are stratified in different zones; the eastern coastal provinces are
stratified in the ‘core’ zones of the international division of labour, whereas the
inland provinces and remote areas in the western regions are stratified as
semi-peripheral and peripheral economies. Likewise, within the US, some
resource-rich and agriculture-driven states are ‘peripheral’ in their trade rela-
tions with China.1
World-System Theory emphasises the complex interplay of opportunities
and constraints, enlargement and the reduction of room for manoeuvre, and
upward and downward mobility, which are embedded in the shaping and
reshaping of the world-economy stratification. The different positions of nation
states in the global division of labour and the change of patterns of competi-
tion and competitiveness seed the economy with permanent inequalities that
cause the dichotomy of development and underdevelopment. In other words,
national positions within the economy’s structural morphology are stratified.
World-System Theory argues that the world’s present-day interconnected-
ness has generated a global culture, wherein the trends of complementarity
and specialisation are manifested in global supply and value chains, causing
continuous re-stratification. Per World-System Theory, a nation’s future is
shaped more by its historical position in the world-economy than by its
internal strategies for growth and national development, because the world-
economy determines a state's destiny (Hein 1992).
The world-economy is also conceptualised as dynamic and changing.
History demonstrates that the upward stratification of national position is pos-
sible, though not easy, by taking advantage of global capital mobility and relo-
cating production. The historical evolution of the capitalist world-economy
shows that the division of labour within the economy constantly brings about
flows of commodities, labour, production and capital across different geo-
graphical areas through chains of manufacturing, trade exchange and invest-
ment. Africa and Latin America were brought into the economy through
colonisation several hundred years ago. China and India are seen as the last
unexploited areas that have been, in recent decades, brought into the capitalist
world-economy (Li 2008).
The most valuable perspective that World-System Theory contributes to
this article’s analysis of the rise of China is Wallerstein’s explanations on the
dynamics of the world-economy with regard to ‘cycles of hegemony’

1
According to China Business Review, in 2013 agricultural products and commodities
remained the US’s largest export to China, but shipments of higher-value products such as
vehicles and airplanes were also growing. According to statista.com, in 2017, the top US exports to
China were civilian aircraft and oilseed grains. This data indicates that although the US is
undoubtedly a core state, its economy still falls into different “economic zones” (a concept of
world system theory) and contains both core-like and peripheral products.
 The rise of China and its impact on world economicstratification and re-stratification 5

(Wallerstein 1983). Wallerstein argues that the long-term dynamics of the capit-
alist world-economy can be analysed through the lens of ‘long waves’; in other
words, the shift of global growth, stagnation and recession, which represents
the cycle of hegemony that describes the rise and fall of hegemonic states
within the economy as a whole. The catch-up process of a rising hegemonic
power consists of achieving a gradual superiority in three areas: (1) productive
power; (2) trade and commercial leadership; and (3) financial leadership.
China’s rise in the past three decades arguably precisely follows these steps.
The current China-US competition and especially their trade war demonstrates
the rivalry between rising and declining powers, despite the fact that the
‘dollar hegemony’ of global finance is not yet fundamentally challenged. In
addition, this article deems it necessary to add a fourth dimension in China’s
catch-up—China’s emerging challenge in global and regional military-strategic
superiority. Even NATO formally defined China as a strategic challenge for
the first time at its 70th anniversary summit.

Revolutionary China in the global stratification (1949–1978)

In the early 1970s, with the background of the Cold War as its historical plat-
form, and anti-hegemony as its diplomatic strategy, the Chinese leader Mao
Zedong advanced his famous political theory of the ‘Differentiation of the
Three Worlds’ (‘Three Worlds Theory’).2 The theory stratified countries accord-
ing to their ‘political’ position in the international order. The First World con-
sisted of the US and the former Soviet Union (USSR), hegemonic superpowers.
Politically and ideologically they were considered imperialist powers and
China’s primary enemies, with the USSR regarded as the most aggressive
because it was a newcomer and expansionist hegemon. The Second World
referred to those countries of American allies; in other words, those middle-
range Western powers including Japan. These were the political forces that
could be allied with as part of an international united front against the super-
powers. The Third World covered the vast majority of developing countries and
countries in the Non-Aligned Movement. They were the most reliable revolu-
tionary force in opposing the superpowers.
Denied participation in the international division of labour in the US-led
world-economy, China had to search for other power sources for legitimacy
and survival. Mao’s Three Worlds Theory’ was premised on the political div-
ision of global power relations from which China could generate room for
manoeuvre and upward mobility. Perceiving itself as the leader of Third
World revolutionary movements, China firmly supported Third World coun-
tries in their struggles against hegemonism as well as the struggles waged by
some countries of the Second World against interference and control by the

2
In 1974, then Chinese Vice-Premier Deng Xiaoping (1904–97) explained the Three Worlds
Theory in a speech to the United Nations, justifying China's cooperation with non-communist
countries. Deng Xiaoping also emphasised that China was a socialist country, a developing nation,
and that China belonged to the ‘third world’. The Chinese Government and people firmly
supported all the oppressed peoples and nations in their just struggles. Deng also openly declared
that China was not and would never be a superpower in the future. This promise is facing serious
challenges now, as China rapidly becomes the second-largest economy in the world as well as a
rising military power.
6 Xing Li

Figure 1. Mao Zedong (left) vs. Wallerstein (right) on their ‘Three Worlds’.
superpowers. China was firmly opposed to the expansionism pursued by the
superpowers. Mao’s Three Worlds Theory put China in the leadership position
of global revolutionary forces in an attempt to carry out a number of trans-
formative ‘great-leap-forwards’ in the spheres of political, economic and social
structures, and cultural traditions in ways that defied conventional ideological
and political norms in established capitalist as well as socialist states.
Mao’s Three Worlds Theory provided a scientific assessment of the then
world realities, underlining China’s foreign policy principles and practices.
(His exact words can be read in a talk with President Kenneth David Kaunda
on February 22, 1974.) The theory guided China to take advantage of global
political upward mobility and room for maneouvre by aligning itself strategic-
ally with the political struggle of the developing world. A hallmark achieve-
ment of the strategy occurred on the 25 October 1971, when Albania's motion
to recognise the People's Republic of China as the sole legal China was passed
by the United Nations (UN) as General Assembly Resolution 2758, making
Beijing one of the five permanent members of the UN Security Council. This
victory proved that Mao’s analysis of the world situation and his ‘three
worlds’ political stratification played a decisive role in receiving valuable sup-
port from the majority of the developing countries, especially African coun-
tries, and including some of the ‘second world’ countries: the United Kingdom
and France. One Chinese scholar pointed out the important role and contribu-
tion of Mao’s Three Worlds Theory in helping China break through the ‘iron
curtain’ surrounding the US-led western hostilities:

[Mao’s Three Worlds Theory] has a very special value for the times, especially with
regard to its philosophy and principles in areas such as the principles of international
ethics and justice, discourse power and national image, security mechanisms and strategic
partnerships, and interdependence and cultural transcendence, all of which are precious
ideological resources that we should cherish. (An 2013, 35)

Figure 1 shows that both Mao’s Three Worlds Theory and Wallerstein’s
‘three stratifications’ theory attempt to conceptualise global patterns of power
and domination and forces for change. Mao’s theory emphasises political
 The rise of China and its impact on world economicstratification and re-stratification 7

power, political mobility and class relations, whereas world system theory
focuses on economic relationships, the system’s law of value, and class rela-
tions. The former aimed at benefiting from upward mobility and room for
manoeuvre on the basis of global political solidarity on a South-South axis,
while it suffered from being economically constrained by US-led global capital
containment. The latter emphasises upward mobility and room for manoeuvre
through integration into the capitalist world-economy by benefiting from cap-
ital mobility and production relocation on a North-South axis, while pointing
out the limited impact on the capitalist world-economy as a whole by individ-
ual political and economic challenges at the national level.
The objective of Mao’s theory was to create an emancipatory mobilising force
for political and social change, whereas China’s external self-perceived role as
the leader of the Third World stratification was internally reflected and rein-
forced by the Maoist self-reliance and self-sufficiency socialist path of develop-
ment. Maoist socialism was projected as a potential development model and
ideology, and the central goal of Chinese socialist politics was seen to challenge
the unequal and unjust hierarchy of the US-/Western-dominated world order.
Such a socialist hegemonic project, although seemingly threatening, existed
more or less outside the US-led capitalist world-economy. In other words,
Chinese socialism was more an ideological and political challenge than a struc-
tural force to threaten the functioning of the US-led capitalist world-economy.
But seen from the world-system perspective, China’s pursuit of self-reliance
and self-sufficiency could be understood as socialist states’ protective ‘delink’
from the world-economy and their attempt to break the chains of unequal
exchange. It can be seen as ‘mercantilist withdrawal’, a strategy adopted by
individual socialist states to achieve upward mobility within the confines of
the world-economy (Wallerstein 1974).

Chin
as position in the stratification of the world-economy (1978–2010)
What is the implication and impact when a country like China, with a population
of about 1 billion in 1978,3 joins the capitalist world-economy, experiences four
decades of high economic growth, moves rapidly from a peripheral state to semi-
peripheral state and is now increasing the portion of its position as a core state?

Joining the regional flying geese stratification

When China started its economic reform in the late 1970s, its open-door policy
attracted global investment. Many regional labour-intensive and capital- and
technology-intensive industries moved to China. For instance, Hong Kong has
moved almost its entire manufacturing industry to Mainland China while con-
tinuing to act as a financial and service centre. Taiwan and Mainland China
have developed similar dependent economic relations in recent years. As a
result of these shifts, the regional growth pattern and convergence structure
began to change.

3
The Chinese population was 972,205,442 in 1978 when the country started its open-door
policy. In 2019 the population is 1,433,783,686. Data retrieved from <https://www.worldometers.
info/world-population/china-population/>
8 Xing Li

China’s first move in its economic reform was to join the East Asian ‘flying
geese’4 division of labour as part of the regions export-oriented industrialisa-
tion (EOI) model. The flying geese is a foreign direct investment- (FDI) based
and export-driven growth model (Kojima 2000). The EOI growth strategy
(Johnston 2019) refers to a trade and economic policy, or a development strat-
egy, aiming to promote economic growth and industrialisation through export-
ing manufacturing goods within the industrial areas in which a nation has a
comparative advantage. The East Asian export-led growth implies competing
for foreign markets while selectively opening domestic markets to foreign com-
petition in exchange for market access in other countries. The EOI is an out-
ward-looking strategy that emphasises participation in international trade by
encouraging the allocation of resources and labour to export-oriented indus-
tries. Some central features of EOI: (1) focussing on export promotion through
policies such as export subsidies; (2) educating and training labour forces in
line with skill formation; (3) applying advanced technology and tax conces-
sions for export promotion.
The flying geese EOI model implies a life cycle of industries across states in
which industrial companies act like migrating geese, flying from state to state
as costs and demand change. Manufacturing factories from a technologically
leading state are compelled by labour price pressures to outsource or invest in
a comparatively low-cost state. By doing so, technology and know-how are
also passed down the chain of developing economies.
The flying geese pattern of regional economic relations in East Asia in the
1980s and 1990s resembled a North-South dependent pattern of trade relations
based on comparative advantages. Economic stratification shows how East and
Southeast Asian economies historically developed in a chain, passing from
Japan as the head of the flying geese to the newly industrialising economies
(NIEs), the semi-peripheral part of the flying geese stratification, and then to
China and other Southeastern countries as the peripheral division of labour.
Hiley summarises the positive spill-over effect generated by the flying
geese movement:

The paradigm presupposes dynamic changes in economic relations among advanced

(leading) and developing (catching-up) countries. The significance of the paradigm lies in
its analysis of the linkages between the different countries in a regional hierarchy, the
mechanisms by which development is transmitted from one country to another, the
respective roles of policy and markets in this process, and the stability and sustainability
of the process itself. (Hiley 1999, 81)

China benefitted tremendously from the flying geese tiers of production

pattern and the regional division of labour, which provided China a good

4
The concept of the ‘flying geese’ was first coined by Japanese scholar Kaname Akamatsu,
who theorised an economic development pattern by using a flock of flying geese to explain the
economic relationship between developed and developing states. Akamatsu’s theory is seen to
correspond to the core argument of world system theory, that core states extract economic surplus
and transfer profit from the dependent periphery in order to consolidate their leading position in
the world-economy (Yeung 2001, 141). However, some other literature also indicates the fact that
the second layer of the flying geese, Taiwan, Singapore and South Korea, were able to catch up
and move up, vis- a-vis their economic stratification, due to their vital geopolitical position during
the Cold War and due to their internal dynamism (Deyo 1988; Chen 1990; Haggard 1990).
 The rise of China and its impact on world economicstratification and re-stratification 9

catch-up opportunity in terms of receiving FDI, technology and management

know-how as well as production relocation. These factors laid the foundation
for China’s ‘global factory’ status.
Due to China’s internal inequalities, such as unbalanced development and
different levels of comparative advantages between its inland and coastal prov-
inces/regions, it has occupied multiple positions across different industrial
divisions of labour. China’s domestic development in the past three decades
has contained flying geese characteristics manifested by its coastal and inland
economic interactions (Qu et al 2012). This was not a disadvantage for China;
rather, this enabled the state to cooperate with the rest of the states on the fly-
ing geese model, both vertically and horizontally. Different Chinese provinces
were able to give full play to China’s comparative advantages with all coun-
tries in East Asia and beyond.

From playing a recipient’s role to becoming a global economic locomotive

Since the 1990s, when US liberal hegemony began to push the Washington
Consensus forward on a worldwide scale, global FDI as a result of financial
deregulation began to spread to East and Southeast Asian countries. As one
researcher documents, ‘[ … ] during the period 1991–1997, the FDI inflows to
South-East Asia (ASEAN) have reached about 8% of the global foreign direct
investments, being placed among the world’s largest recipients of FDI in the
1990s’ (Diaconu 2014, 903–904). The early Japan-based flying geese regional
economic order was transformed into a new and more horizontal economic
relationship of competition, in which countries in this region competed with
one another for capital and financial resources as well as for the export market.
The new situation showed that many enterprises and industries in the region
faced direct competition with Chinese products. To some scholars, the rise of
China’s economic competitiveness was among the factors that led to the shift
of financial and economic balance of power in the region, which partially con-
tributed to the regional financial difficulties in 1997 (Li et a).
The world has witnessed China’s rise to a global economic locomotive since
the 2000s. According to the IMF’s World Economic Outlook 2005, China’s contri-
bution to world economic growth rose from 16.3% in 2000 to 20.6% in 2004.
More strikingly, from 2013 to 2018, the average annual figure of China’s contri-
bution to world economic growth reached 28.1%, ranking first globally (The
Financial Express 2019, August 31). In addition, China’s contribution to global
trade growth showed another indispensable aspect of its global and regional
dynamism. Trade with China has a decisive effort on the economic and trade
growth of developing countries. China’s economic power, especially in export-
oriented and processing-based trade, reveals the intensification of its integra-
tion into the global vertical division of labour as well as its role as an import-
ant promoter in the development of intra-regional trade.
China’s emergence as a global manufacturing centre was the result of trans-
national companies from developed countries, such as Japan, the US and the
EU, taking advantage of the manufacturing networks in East Asia and out-
sourcing their labour-intensive products to China and ASEAN countries for
processing and assembling. This indicates that the expansion of intra-industrial
trade in East Asia was partly driven by the global trade of spare parts. Again,
10 Xing Li

China was the essential beneficiary of global trade. One scholar shows that
‘China’s exports (over 50% being processing trade) embody raw materials,
parts and components, technology and equipment, and financial and economic
services from different Asian economies, converting “Made-in-Asia” into
“Made-in-China” products for the world market’ (Wong 2013, 288).
Other developing countries in the Global South also felt the increasing posi-
tive impact of China’s changing role in the 2000s, specially driven by its mem-
bership of the WTO in 2001. For example, China’s impact on Brazilian
development was positive on balance, particularly in the period preceding the
global financial crisis in 2008. Brazil’s positive economic development in the
booming years of the global economy prior to the crisis was attributed largely
to the stabilizing effect of China’s growing imports (Li and Christensen 2012).
For example, Neri (2009, 225) points out that 10 million new jobs were gener-
ated in Brazil between 2004 and 2007 due to strong macroeconomic results in
which China played a positive role through its imports from Brazil and its
impact on Brazilian export prices in commodities and in the agricul-
tural sector.

China’s economic rise and the impact on global re-stratification

(2010–present)
The world capitalist economy, in line with Wallerstein’s conceptualisation, is
characterised by a series of cyclical rhythms—the rise and fall of economic
prosperity and the system’s upward mobility. More significantly, the world-
economy’s series of recurrent tempos was echoed by the rise and decline of
new hegemonic powers (system’s guarantors). The emergence of any new
hegemon, regardless of its type, is unavoidably constrained by the economy’s
fundamental law of value—capital accumulation and profit seeking. However,
the law of the economy does not necessarily prevent an emerging power from
achieving the objective in line with its own unique pattern of control
(Wallerstein 1997).
Likewise, the rise of China can be plausibly perceived as part of the
economy’s rhythmic cycles in upward mobility, and China continues to follow
the core features of the world capitalist economy. China is believed to be moti-
vated or driven to act as a new economic guarantor due to its economic inte-
gration and market dependence in the economy’s mode of production and
capital accumulation. Today, China is seemingly becoming a champion for glo-
balisation and free trade, contrary to the “America first” protectionism advo-
cated by the Trump administration.
However, the impact of China’s rise on the world-economy has been a
debatable topic for decades. Arrighi (1994) asserts that, given China’s popula-
tion, any dramatic economic rise would destabilise the world-economy. From
this perspective, China's demographic size and economic expansion are ‘far
more subversive of the global hierarchy of wealth than all of the previous East
Asian economic “miracles” put together’ (Arrighi 1994, 382). Arrighi argues
that ‘accommodating the upward mobility of a state that by itself accounts for
about one-fifth of the world population is an altogether different matter’ (1994,
382–383). One scholar gives a precise description of China’s impact on trad-
itional economic stratification:
 The rise of China and its impact on world economicstratification and re-stratification 11

… . the rise of China has drastically changed the shape of the stratified world-economy in
that it is no longer a classic trimodal distribution (small core, slightly larger
semiperiphery, and most of the world in the periphery). Instead, much of the world’s
population (at the country level) has moved to the center. This in turn has created and
will continue to produce a new type of pressure on the world-system. With overcrowding
in the middle stratum, China and those in the middle, may be forced to move away from
a doctrine of cooperation to one that is more aggressive or even confrontational (Grell-
Brisk 2017, 2).

From global ‘deindustrialisation’ to global ‘Made in China’

Deindustrialisation refers to the phenomenon that, ‘During the past 25 years,
employment in manufacturing as a share of total employment has fallen dra-
matically in the world’s most advanced economies’ (Rowthorn and
Ramaswamy 1997, 1). Research shows that ‘In the 23 most advanced econo-
mies, employment in manufacturing declined from about 28 percent of the
workforce in 1970 to about 18 percent in 1994’ (ibid., 2). By contrast, ‘Made in
China’ refers to an opposite phenomenon in China where its agricultural
employment as a share of the labour force fell from more than 70% in 1978 to
only 30% in 2014 (Hou et al 2017, 5). If the labour forces of private firms and
the self-employed are excluded, urban manufacturing employment soared
from 32.4 million in 2000 to 52.4 million in 2014 (Lardy 2015). The Chinese
manufacturing sector experienced rapid development that contributed to the
country’s unprecedented GDP growth. In 2011, China surpassed the US to
become the world’s largest producer of manufactured goods (Hou et al
2017, 5).
Since the 1980s, China’s export-oriented development strategy (Made in
China) has impacted countries on different strata of the world-economy. Both
developed and developing countries have been, consciously or unconsciously,
following a similar pattern of deindustrialisation. Some scholars argue that
deindustrialisation is not necessarily a negative phenomenon, but rather an
expected consequence of changing industrial dynamism in the relationships
between manufacturing output, employment and trade (Rowthorn and Wells
1987). Others contend that ‘deindustrialisation is a universal phenomenon that
most countries experience at a certain stage of economic development, it has to
be understood that the factors that cause deindustrialisation differ widely
across countries, thereby dictating different deindustrialisation paths’ (Kim
and Lee 2014, 65).
The dual phenomena of the rise of Made in China and global deindustrial-
isation are the consequences brought about by China’s high economic growth
in the past decades, which can be seen as reflecting the positive spill-over
effect of taking advantage of the economy’s upward mobility. In line with this
understanding, Li Minqi documents that ‘China has been the primary benefi-
ciary of the latest round of capital relocation. Since 1993, China has consist-
ently been the largest receiver of foreign direct investment among the
“developing countries”’ (Li 2005, 435). Even today, China is still one of the
world’s largest FDI recipients. By 2019, China received $140 billon FDI inflow,
12 Xing Li

ranking second after the US according to UNCTAD 2019 statistics

(UNCTAD 2020).
The global rise of Made in China was driven by two parallel deindustrial-
isation processes in core developed economies (North) and in semi-peripheral
and peripheral developing economies (South). In the former, deindustrialisa-
tion was caused by capital and production relocation to benefit from China’s
cheap labour and low production cost. In the latter, deindustrialisation was
caused by a ‘commodity boom’, selling raw materials and commodities to fuel
China’s manufacturing. In other words, the deindustrialisation process in the
North was strategically aiming to move the competition to high-tech innov-
ation industries and to enlarge the share of the ‘soft economy’ in terms of the
financial and service sectors, whereas the process in the South was largely
driven by the easy and rapid pursuit of economic gains in terms of the rise of
commodity prices.

Deindustrialisation and re-stratification in core countries (North)

The China-US trade war in the past two years (2018–2019) indicates that US
debt and its trade deficit with China have reached an unbearable level. The
bipartisan consensus in Washington is that China's achievement in moving up
in the global supply and value chains has led to Beijing’s larger share of global
surplus and the reduction of the profit margin for traditional core states. The
Chinese state-centric development model led by its state-owned enterprises
(SOEs) is seen by core countries as the source of Beijing’s unfair competition.
Chinese state capitalism characterised by the monopoly of Chinese SOEs has
been the underlining focus of conflicts in the China-US trade war. The world’s
leading four largest banks are Chinese state-owned banks.5 China's increasing
presence in Latin America and Africa also intersects with the interest of major
core countries,6 leading to an inevitable conflict of interest.
In the view of Wallerstein’s World-System Theory, for capital to be shifted
away from declining into rising sectors, the declining sectors need to be relo-
cated from the core to the semi-periphery (or to the periphery, according to
the labour conditions and the technological level). Some countries in the latter
two categories will benefit from such global production and capital relocation.
Historically, it was in such pivotal moments that opportunities for upward
mobility within the economy were generated and regenerated (Wallerstein
1979, 69–73). For the core countries in the North, the deindustrialisation pro-
cess had already begun in the 1970s, in the forms of production outsourcing
and capital relocation as the response of transnational capital to the oil crisis.
The rise of the East Asian NIEs was also part of the global relocation of indus-
trial production.
The leapfrog growth of financialisation in the developed core (speculative
financial business), as a result of liberalisation and deregulation policies,

5
The Industrial & Commercial Bank of China, the China Construction Bank, the Agricultural
Bank of China, and the Bank of China
6
Latin America is in closest proximity to the US, and the region has been labeled ‘America’s
backyard’. Likewise, Africa is traditionally connected with major European powers through its
colonial history. The continent is also identified as Europe’s resource-rich backyard.
 The rise of China and its impact on world economicstratification and re-stratification 13

eventually created a bubble economy, leading to the 2008 global financial cri-
sis. The root cause of the crisis was the over-financialisation and deindustrial-
isation of the core countries’ national economy. Research based on a large
amount of data from Eurostat and the International Labour Organisation (ILO)
shows that, during the period from 1995-2015, financialisation had an impact
on the deindustrialisation process in the EU, and both the financial and service
sectors were unable to absorb the supply of labour or to produce additional
value to compensate reduction in the industrial sector. The result led to higher
unemployment and lower economic growth. Such a negative impact is stron-
gest in middle- and high-income countries (Svilokos and Burin 2017, 583, 599).
It is argued that, when China began to seriously implement the economic
reform and open-door policy in the late 1970s and 1980s, it coincided with the
unleash of neoliberal globalisation in the core. During the last two decades in
the 20th century, the relocation of productive capital and manufacturing out-
sourcing has resulted in a wave of deindustrialisation in developed economies.
Particularly in the US, when the aggregate value added from non-productive
sectors (such as finance, property and services) as a GDP percentage exceeded
that of manufacturing for the first time in 1980, the process of outsourcing
manufacturing abroad accelerated. A similar process also occurred in Japan
and Europe.
China has been one of the largest beneficiaries of deindustrialisation in the
North and the destination for global manufacturing relocation, which has
helped to upgrade its stratification in global value chains. China’s move up the
global value chains has been successful, as demonstrated by the upsurge of
China’s high-tech exports. High-tech exports—such as airplanes, computers,
pharmaceuticals, instruments, robotics, electrical machinery and AI products—
require high research and development intensity. Statistics from
Worldatlas.com and Knoema.com (2017) show that China has been ranked the
world’s largest high-tech exporter for many years. According to one study,
‘One consequence of China’s move up the value chain has been its manufac-
turing trade surpluses with the US and EU. Indeed, China is now the largest
exporter of manufactured goods to the US, and the EU is China’s largest man-
ufacturing export market since 2008’ (Wong 2012, 139). China has overtaken
the US as the largest trading state since 2013, and much of its imports and
exports are in manufactured goods (Investopedia 2018, October 21). However,
China’s status as a high-tech exporter is debatable; a large percentage of its
exports is in fact exports by subsidiaries of Western, Japanese and Taiwanese
companies (Xing 2014).
The Chinese economy belongs in all three economic zones (core, semi-per-
iphery and periphery). Within each zone is a distinctive specialised form of the
relations of production reflected in the production value chains connected with
technological specialisation. Despite China’s rapid entrance into the core zone
with its achievements in many high-tech areas (Fannin 2019), such as super-
computers, robotics, AI, renewable energy, advanced nuclear energy, and
space technology, China is still highly dependent on importing chips from the
US, Japan or Taiwan that it needs for high-tech development. This weakness
was proven by the China-US trade war and is recognised by Huawei, China’s
biggest telecoms and mobile phone producer. Therefore, China is not a full-
14 Xing Li

fledged core economy even though part of its divisions of labour and products
are stratified in the core zone.

Deindustrialisation and re-stratification in semi-peripheral and peripheral

countries (South)
The decline of US involvement in Latin America since the financial crisis of
2008 provided China with opportunities to expand its political and economic
engagement in the region. China’s increasing regional presence seemingly ech-
oed the spirit of some countries to reduce their dependence on US liberal
hegemony. However, the politics of China, especially economically, are funda-
mentally no different from mainstream economic liberalism and potentially
reinforce post-hegemonic and liberal directions in regional and sub-regional
governance (Legler et al 2020). In other words, China’s success is derived from
its global competitiveness led by economic liberalism. Its state-led ‘free trade’
globalisation is bringing the region back to economic liberalism. History has
not been forgotten—Latin America suffered from the widespread implementa-
tion of neoliberal reforms throughout the 1980s, which is remembered as the
‘lost decade’.
Following China’s economic rise, especially in productive sectors where
Chinese exports largely outcompeted manufacturers in the global South, the
world is witnessing the emergence of a new North-South axis in the stratifica-
tion of the world-economy with China emerging as a new ‘North state’ vis-

a-vis the Global South. Much of the literature (Li and Christensen 2012; van
der Merwe et al 2016; Bernal-Meza 2016; Bernal-Meza and Li 2020) on China-
Latin America and China-Africa economic relations shows the impact China
has on the economy of these two regions and the role that they play in
China’s global development strategy. The economic relations between China
and Latin America increasingly reflect dual complexities of advantages/bene-
fits and disadvantages/constraints.
On the one hand, many semi-peripheral and peripheral countries, such as
those in Latin America, are benefitting from China’s impact by, for example,
exporting raw material and commodities to feed China’s ‘world factory’ role.
China’s quest for global economic primacy has given Latin America an import-
ant role. The commodity boom during the 2000s played an important role in
increasing export earnings in the region. Wise (2016) shows that exports to
China led commodity prices to reach new highs, such as the price of copper
(Chile), iron ore (Brazil), soybeans (Argentina), fishmeal (Peru), and oil
(Argentina and Brazil). The result was an average annual growth rate of 5–7%
in these Latin American emerging economies from 2003 to 2012. More import-
antly, China is playing a rising role in financing the region’s economies, espe-
cially within infrastructure and energy sectors (ECLAC 2018). According to the
report prepared by the Economic Commission for Latin America and the
Caribbean (ECLAC), ‘The China Development Bank and the Export-Import
Bank of China are the institutions of the State that have, since 2005, provided
almost all of China’s development funding in the region. The China
Development Bank participated in 80% of the loans to Latin America and the
Caribbean made over the 2005-2016 period’ (ECLAC 2018, 22).
 The rise of China and its impact on world economicstratification and re-stratification 15

On the other hand, the slowdown of Chinese economic growth in 2012 and
the saturation of demand for these commodities has implied a coming reces-
sion in these same economies. This circumstance represents a good example of
economic ‘dependency’ between core and semi-peripheral/peripheral countries
conceptualised by dependency theory. Furthermore, China's competition weak-
ens the relative monopoly of the existing semi-peripheral states in certain glo-
bal commodity chains. The rising unequal exchange trade relationships
between China and many existing semi-periphery countries has led to the lat-
ter’s economic primarisation or peripheralisation due to the change of their
position from being a manufacturing goods exporter to being a commodity
supplier. Li Minqi provides a good explanation:

As China becomes the center of world manufacturing exports, Chinese society is likely to
experience rapid industrialization and urbanization. Its class structure will be
fundamentally transformed. The share of proletarian and semiproletarian wage workers
in the population will increase substantially, and the share of peasants will fall. Within
one or two generations, China’s degree of proletarianization will reach the current levels
in Latin American and Southeast Asian semi-peripheral states. As a result, Chinese
workers will demand semi-peripheral levels of wages …

China has a labor force larger than the total labor force in all of the core states, or in the
entire semiperiphery. Should China become a fully established semi-peripheral state,
competing with the existing semi-peripheral states in all commodity chains, the
competition eventually must lead to convergence between China and the existing semi-
peripheral states in profit rates and wage rates. This convergence may take place in an
upward manner or a downward manner. (Li 2008, 435–436)

The above analysis also verifies the two points of this article that can be
added to world system theory’s dimensions.
First, the enlargement of China’s semi-peripheral space in terms of its share
of the global productive division of labour implies the simultaneous enlarge-
ment of its working class as a new buffer which is conducive to the existing
core economies for capital accumulation and surplus exploitation. While China
has suddenly added a huge number of its own population into the semi-per-
ipheral zone, the shape of the world-economy’s conventional three-layered
structure – a large periphery, a relatively small middle stratum, and a smaller
core – has been changed (Grell-Brisk 2017).
Second, it raises a serious question regarding China’s semi-peripheral rela-
tionship with the Global South, especially Latin America. The relationship may
reproduce similar historical patterns of economic stratification in the world-
economy in which Latin America suffered from unequal exchange with major
core countries (the UK and the US), which dependency theory identifies as the
source of Latin American underdevelopment.
At the heart of the problem lies the negative impact of China-Latin
America economic relations on the region’s position in the stratification of the
world-economy. Seen from Sevares’ point of view (Sevares 2015), with Latin
America’s growing economic dependency on China and with the risk of down-
grading the region’s position in the global economic stratification, Latin
America is experiencing a repeat of history, a situation akin to the region’s
16 Xing Li

integration into the global division of labour in the 19th Century. Having con-
tinuously been kept as a raw material provider to global markets, the region
was, is and will be unable to successfully integrate into global production net-
works in the manufacturing sector. This situation is confirmed by a recent
ECLAC report:

In 2016, commodities accounted for 72% of the region’s exports to China, compared to
27% of its shipments to the rest of the world; in contrast, low-, medium- and high-
technology manufactures accounted for just 8% of the region’s exports to China,
compared to 57% of its global exports. For imports, the situation is reversed: in 2016,
while low-, medium- and high-tech manufactures accounted for 91% of the region’s
imports from China, their share in imports from the rest of the world —while still high in
absolute terms, at 68%— was substantially lower in comparative terms. In other words,
trade between Latin America and the Caribbean and China remains clearly inter-industry:
raw materials for manufactures. (ECLAC 2018, 41, italics added)

There are ongoing lively debates about whether China’s market demand
and manufacturing competitiveness constrain Brazilian industries. Brazil in
1980 contributed 2.3% to the global industrial GDP, and China 1%; 30 years
later, in 2011, Brazil was left far behind. Its contribution decreased to 2.1%,
while China’s increased dramatically to 8.1% (Andreoni 2019). The conclusion
of a comprehensive research project based on a large amount of export and
import data as well as price factor states that:

The growth of China has been an important factor contributing to this deindustrialization.
China’s impact on Brazilian manufacturing has been both direct and indirect. The direct
effects have involved increased imports of manufactures from China, which have in part
displaced domestic production and have not been compensated for by a growth of
Brazilian exports of manufactures to China. As a result the trade deficit with China has
contributed to the overall increase in Brazil’s deficit in manufactures. (Jenkins 2015, 58)

The above view on China-driven deindustrialisation in Latin America is

shared by many scholars. Some Latin American analysts, such as Oviedo
(2012), Bernal-Meza (2016), even claim that the world is witnessing emerging
Chinese economic hegemony in the region.

Conclusion
This article discusses China’s global rise and its impact on world economic
stratification in an attempt to provide a framework for understanding the new
North-South axis in the current international political economy by focusing on
the emerging economic relations between China and the Global South. China's
capital and trade expansion in the Global South in the past decades has
brought about upward mobility and room for manoeuvre for various develop-
ing countries in the Global South, but it has also brought about a new cycle of
unequal exchange and deindustrialisation in many developing countries and
regions, reflected in a North-South nexus, leading to the criticism expressed by
‘neo-imperialism’ and ‘neo-colonialism’ discourses.
The rise of China has drastically changed the landscape of the world-econ-
omy, conceptualised by world system theory as a classic trimodal stratification
 The rise of China and its impact on world economicstratification and re-stratification 17

with a small core, a relatively larger semi-periphery, and a vast periphery.

With a large portion of China’s population moving to the up-and-middle cat-
egory covering both the core and the semi-periphery, and with its increasing
share of global wealth and resources as well as with its enlarging occupation
in higher value chains, China is not only producing new challenges to the
already divided structure of the world-economy but also generating different
effects on different strata of the world-economy. On the one hand, China is
both politically challenging and economically overcrowding the core with its
state capitalism model. On the other hand, it is also becoming an emerging
hegemon (a core state) to the semi-peripheral and peripheral parts of the world
order (Li 2019).
China’s growing presence in Latin America and Africa represents a new
round of the historical ‘cyclical rhythm’ of the capitalist world-economy and a
new round of ‘cycles of hegemony’ (Wallerstein 1983). While China is grad-
ually and successfully moving towards/into the core, it still needs the semi-
periphery and periphery as its ‘spatial fix’ buffer zones. To put it more clearly,
in facing industrial overcapacity, overproduction, environmental and resource
constraint, as well as rising labour cost, China’s development policies and
strategies will possibly bring about a new round of world economic re-stratifi-
cation. Its expected deindustrialisation will likely bring about the re-industrial-
isation of some parts of semi-periphery and periphery regions driven by
Chinese investment and production relocation. Interestingly, the world is also
witnessing a struggle for ‘re-industrialisation’ in some parts of the Global
North, such as the Trump administration’s attempt to bring overseas produc-
tion back to the US as an attempt to counter the dominance of Chinese
manufacturing.
Beijing’s ‘Belt and Road’ initiative and ‘made in China 2025’ goal represent
a new round of global capital mobility and production relocation, which indi-
cates that China is continuing to upgrade its position towards more sophisti-
cated production in global supply and value chains, while outsourcing its
labour-intensive and low-tech light industries. According to a World Bank
report (2015):

Between 2003 and 2012, direct investment flows from China to Africa grew at an
annualized compound rate of 47.8%, with investment stock increasing 52.5%. In 2013, FDI
from China is estimated at $3.5 billion, and cumulative investment stock at over $25
billion. China has direct investment in 50 African countries, and is increasingly
diversifying out of primary sectors.

Beijing’s official sources confirm that the rising labour cost in China is
pushing both Chinese and global clothing manufacturers away from China to
other parts of the Global South, and in recent years 3,000 Chinese companies
have invested USD $2.7 billion in Africa and created more than 600,000 jobs
(CCTV 2016). Africa perfectly matches China’s ‘going global’ strategy, and
with its vast and untapped labour resources the continent is identified as the
ideal location for China’s investment relocation and labour-intensive industries
(Sun 2014).
It is difficult to arrive at any definitive conclusion regarding the relation-
ships between the rise of China and the Global South; the process is still
18 Xing Li

ongoing, and China’s impact is continuing to be felt worldwide. Global discus-

sions and debates on these relationships will continue to be heated. The ana-
lysis of this study shows that China-Global North and China-Global South
relationships will continue to be in a flux and reflux, rather than in a purpose-
ful forward (benefits and opportunities) or a backward (challenges and con-
straints) movement. This is because a more horizontal world order brought
about by China’s global rise both creates more space for interaction and com-
petition and generates both opportunities and challenges. Li Minqi’s work
(2015), which presents a pessimistic scenario and emphasises the contradiction
and crisis of the capitalist world-economy brought about by China's rise, pre-
dicts a coming global crisis because the world system is reaching its limits,
overburdened by class struggle, global economic imbalances, peak oil, climate
change and political power struggles. China would be at the epicentre of these
contradictions (Li 2015). An open question remains whether the world system,
as world system theory posits, is resilient and dynamic enough to be able to
eventually overcome the limits and move to the next round of its cycle.

Disclosure statement
No potential conflict of interest was reported by the author.

Notes on contributors
Political Science, Aalborg University, Aalborg 9220, Denmark.
Email:xing@dps.aau.dk

ORCID
Xing Li http://orcid.org/0000-0002-8033-9834

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