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China’s Unavoidable Financial Rise

A decade ago, few economists were bullish about the growth of China’s external financial strength. But the government’s commitment to capital-market opening and renminbi internationalization – together with China’s sheer size – have fueled a rapid financial rise that will only continue.

SHANGHAI – The great powers in history have tended to have one thing in common: size matters. While a large market does not guarantee dominance in other realms, it certainly helps, perhaps more than any other single factor. This was true of the United States, and now it applies to China. Beyond being a leading economic and trading power, China is increasingly – and inexorably – becoming a global financial power.

Somehow, too many economists in the West did not see this coming. Even a decade ago, few were bullish about the growth of China’s external financial strength, with skeptics highlighting the country’s vulnerabilities.

A rare exception is Brown University’s Arvind Subramanian. In his 2011 book Eclipse: Living in the Shadow of China’s Economic Dominance, Subramanian argued that China’s dominance was not only more imminent, but would also be broader than virtually anyone expected, involving huge financial influence among the domains that China would reshape. Given his prescience, the title of the Chinese translation of his book – The Big Forecast – might have been more apt.

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