As China is like a bazaar for components and intermediate materials, a country can focus on what it is good at, import everything else from China at low prices and compete in the global market. China’s per capita income is about US$12,000, and buying from China doesn’t cut into a country’s competitiveness.

Two decades ago, big cities in developing countries had a distinct emerging-market look – congested roads with plenty of potholes, people hanging on the side of a speeding bus and decrepit buildings dotting the roadside. Nowadays, when one travels through many big cities in the emerging world, it is easy to see modern trappings such as subways and skyscrapers popping up everywhere.

The visible differences between big cities in the emerging world and developed countries are becoming less clear. Chinese equipment and construction materials as well as implementation capacity are driving this transformation.

Thailand has a per capita GDP of more than US$7,000 and Indonesia more than US$4,000. They can afford China’s prices, which means they go for the most modern assets in development. If you can look like Manhattan at an emerging-market price, why not?

Appearances do matter. Talent around the world could live in a country such as Indonesia or Thailand without sacrificing quality of life compared to Europe or North America.

The quality of life in emerging economies is becoming better than in some developed economies because of their lower living costs. This development will drive global talent to choose to live in emerging economies, narrowing the gap in human resources between the Global South and Global North.

China’s success in emerging economies is because of its breadth and depth in industrial output and low prices. China is covering similar ground to countries that have far greater per capita GDP.

Its low prices also lead to more demand from the emerging world. This virtuous cycle is putting the emerging world on a higher growth path, thanks to more capital formation.

When Japan, South Korea and Taiwan industrialised, their costs rose and their currencies appreciated to the extent that their per capita income caught up with advanced economies in the West. Yet even after four decades of rapid growth, that has not happened in China, where costs are still a fraction of those in developed economies.

To compete against China, established industrial powers are under pressure to cut cost and, hence, living standards. Their economic struggles in the past decade reflect this challenge. They have been trying to defend their living standards by stimulating consumption, not addressing competitiveness challenges.

That has led to unprecedented debt build-up in the household and government sectors. Unless they change their ways soon, which is unlikely, debt crises are inevitable.

The global recession risk in 2023 is largely because of the inflation-induced landing that is inevitable following the excessive stimulus rolled out during the pandemic and before. As the developing world is benefiting from growing trade with China, it will be more resilient during the coming global downturn.

Dump property or cut holidays? Middle class in China, US prepare for tough 2023

China’s success in the emerging world supports the viability of its peaceful rise. As the relationship with the West becomes more confrontational, Beijing could be tempted to go for military victories to strengthen and extend its economic successes, as other great powers have done before.

But the emerging world makes up most of the global population. As the trade among developing countries becomes a low-priced virtuous cycle, its tailwind can propel China to high-income levels within two decades.

A peaceful rise remains a viable strategy for China. It is a low-risk and low-cost path for China to become the dominant economy in the world.

Andy Xie is an independent economist