In a book titled The World Is Flat, author Thomas Friedman postulates how the emergence of Asian powers, which has bridged gaps between developed and developing countries, pose a threat to the United States. China's celebrated economist Cheng Siwei is quick to point out that Friedman's theory, one held by many Americans, is biased. Cheng argues that the world has been unevenly developed, and is far from a point of equality. His keynote speech delivered at a forum held by a magazine specializing in management, in which he shares his views about the essence of economic globalization, follows:
Opinions are varied when it comes to today's economic globalization. In the 21st century, world economic globalization is characterized by four distinct features, which can be summed up as: focus on finance, knowledge a priority, information technology oriented and promoting multinationals.
Finance focus
We are in a world where financial integration and economic globalization react dynamically with each other for mutual development, mainly reflected in five aspects:
First, virtual effectiveness of currencies is gradually becoming obvious. Currencies have, to some extent, been "virtualized" as they have begun to deviate from the gold standard and later gold exchange standard. The gold standard, which had its roots in Britain in 1820, was gradually promoted to a gold-pegged currency system worldwide. But after World War I, the system collapsed. As World War II ended and a unified global currency system was established, a gold exchange standard emerged, in which a U.S. dollar-pegged currency system was devised for member countries to follow, resulting in a conventional reserve of U.S. dollars. The United States endorsed a convertibility rate of $35 for each ounce of gold, which eventually assured the United States a dominant role in the world monetary system. However, the Oil Crisis in 1971 caused a declining U.S. currency, leading then U.S. President Richard Nixon to announce the termination of the gold exchange standard, reverting dollars back to an ordinary currency. Since then, currency has been seen as the standard, backed by the trustworthiness of a government, by measuring the purchasing power of a nation. Currency therefore has been a common financial tool for adjustment and reference of monetary policies.
Second, exchange rates can fluctuate violently when the economic strength and purchasing power of a nation fluctuate. Yet whatever exchange rates may be, they only affect the concerned currency's purchasing power in the world market, and seldom its value in the domestic market.
Third, the transnational capital flow, with a rapidly growing size, accelerates. Despite the negative impacts of the September 11 terrorist attacks on the United States in 2001, the international capital volume maintained an average annual growth of around 20 percent in the first years of the 21st century, reaching 27 percent in 2004.
Fourth, virtual capital transactions swell explosively, promoting the development of a virtual economy. According to the Bank of International Settlements, amid the fast development of the derivatives market, the total outstanding notional amount reached $343 trillion globally by the end of 2005, seven times the aggregate gross domestic product during the corresponding period.
Fifth, an ever-expanding global financial market has substantially changed the world economic pattern.
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