China designates itself as a developing country in the World Trade Organization and is classified as such by the World Bank based on the income per capita criterion. This enables China to avoid many of the responsibilities and disciplines applied to rich countries in international organizations, while qualifying for preferential treatment in some instances. Yet China is already the world’s largest economy by some measures and is home to nearly as many companies as the United States in the Forbes list of the 500 largest companies. China is the largest producer of electric vehicles, has the global lead in important technologies such as 5G, and is among the leaders in artificial intelligence, facial recognition, electronic payment systems, and space exploration. It is the largest official creditor to developing countries. Understandably, China’s continued self-designation as a developing country is a major source of tension between China and the United States and its allies.
What to make of this? Is China really a developing country? And does it matter whether it is or is not? This brief shows that—despite its many achievements—China remains a developing country by any plausible criterion. Yet China is exceptional since it is the first time in history that a relatively poor nation plays a dominant role in the global economy.
China’s exceptionalism has major implications. China should become more aware of the global repercussions of its policies, while the United States and its allies need to understand better China’s limitations and moderate their expectations of China. I discuss what this means in three policy arenas: macroeconomics, development assistance, and climate. In a companion paper, I will tackle another issue where China’s underdevelopment matters, and which is especially complex: trade policies.
PB-15-21-Uri-DadushTo read the full policy brief from the Policy Center for the New South, please click here.