Hello, welcome to visit Shanghai Forum
Reglobalization in the 21st Century: Technological Innovation and the Global South
Li Shimo
Founder and Chairman of Guancha.cn
It is truly an honor, as both an investor in the technology sector and a student of international politics at Fudan University, to share some of my observations and reflections with all of you—including many esteemed professors and senior scholars. The theme of my talk is Reglobalization in the 21st Century: Technological Innovation and the Global South.
We stand at a historic crossroads. In recent years, the forces of globalization and deglobalization have been locked in intense conflict. While globalization has brought tremendous economic development and growth over the past few decades, many now claim that globalization is coming to an end. Today, I’d like to propose a different perspective: perhaps the previous wave of globalization we experienced is indeed ending, but we may very well be standing at the dawn of a new wave—what I call reglobalization.
So, what is degobalization? Borrowing a term from U.S. policy circles, it refers to what the West is attempting to implement—the so-called small yard, high fence strategy.
What does small yard, high fence mean? It involves drawing a circle around a small group of countries—this is the small yard—and then erecting a high fence to separate the rest of the world outside. The goal is to confine critical technologies, resources, and supply chains within this exclusive club while excluding other nations, particularly China. On top of that, tariffs are used to restrict trade, accelerating deglobalization.
It's a beautiful yard. Who is inside it? Who is left outside? Inside the small yard, there are mainly two groups of countries:
1. The British Empire and the other four countries—collectively known as the Five Eyes alliance (we all know who they are).
2. Traditional Western European countries—most of which were part of the Western Christian Church after the first major schism in Christianity a thousand years ago. It also includes geopolitically pro-U.S. nations that have been granted entry, such as Japan.
These countries have a combined population of roughly 0.6 billion and account for just under half of global GDP. Outside the high fence, there are also two groups:
1. Countries in the Eastern Orthodox cultural sphere and NATO's peripheral states—about 500 million people, contributing about 10% of global GDP.
2. The broader Global South—an enormous bloc of 6 billion people, encompassing diverse cultures and systems. This includes economically underdeveloped African nations, wealthy Gulf states, military powers like Russia, and, of course, China, the largest country in the Global South.
While the Global South currently represents about 40% of global GDP, it drives over 60% of global growth. Recently, we’ve seen the small yard, high fence strategy being enforced through technological blockades, supply chain exclusion trade protectionism, ideological demarcation. The goal is clear: to consolidate dominance in high-tech and critical industries by keeping them confined within the small yard.
Another notable trend is, of course, the rise of the global South, in which China and the rising value of technological innovation and productive capacity are a huge driving force behind the rising tide of re-globalization. Of course, this trend is not simply a return to the globalization model of the past, but the construction of a new type of re-globalization that is more decentralized, more resilient, and more in line with the multi-polar world. In the past, we always talked about North-South cooperation. Developing countries were integrated into the international market and brought into line with international standards. But the reality is that today South-South trade has already surpassed the total trade between North-South and North-North by 2023. This means that a closer and more autonomous network of cooperation is emerging among developing countries.
In 2023, the total GDP of the BRICS countries exceeds that of the G7. This is not only a reversal of economic aggregates, but also a systemic shift in the center of gravity. Looking back at the last round of globalization, why did the last round of globalization come to the point where it is now facing an end? From around the end of the Cold War until the financial crisis of 2008, globalization was designed with a division between the center and the periphery. The division of labor was also very clear: the center was the United States and Western developed countries, who were responsible for research and development, military and finance. The US dollar, of course, was the reserve currency. Developing countries were on the periphery, mainly providing cheap labor resources and markets.
Ha-Joon Chang, the Cambridge University scholar, makes this profoundly clear in his seminal work Kicking Away the Ladder: Development Strategy in Historical Perspective: Western countries extensively employed protectionist policies during their early development stages. Only after establishing technological and industrial dominance did they begin promoting free trade—demanding that developing countries run naked (fully liberalize) from the outset. It's a classic case of climbing up first, then kicking the ladder away to prevent others from following. As Joseph Stiglitz observes, this is textbook double standards. Dani Rodrik's extensive research further demonstrates how the current global rules system makes it exceedingly difficult for peripheral nations to enact independent industrial policies—effectively barring them from entering the core.
China was a major exception in this first wave of globalization. Through our own industrial policies and political system, we gradually moved toward or near the center of globalization. Most developing countries have failed to achieve this, and there are reasons for that. Some even refer to China today as a semi-peripheral country. However, this core-periphery structure of globalization has now become unsustainable. Why? There are two main reasons:
First, as the largest developing country in the globalization periphery, China cannot remain on the margins indefinitely. We possess technology, capital, and industrial capacity, which inevitably drives us toward high-quality development, as seen with companies like ZTE and China Mobile.
Second, the U.S. suffers from institutional decay and social division, making it incapable of fairly distributing the enormous benefits gained from globalization or investing in the long-term public resources needed for development.
Over the past 10 to 20 years, many have recognized this—from Thomas Piketty's Capital in the Twenty-First Century to the analyses of scholars, thinkers, and politicians across the U.S. political spectrum. I highly recommend reading Hillbilly Elegy, written by the current U.S. Vice President a few years ago—it’s an important work. Of course, the term hillbilly has been frequently discussed lately. There’s even been a heated argument between China and the U.S. over who qualifies as hillbilly. As Shanghainese, we grew up familiar with this kind of term: country folk. From elementary to high school, we debated who exactly counted as country folk. As adults, we stopped using the term because it’s politically incorrect. Yet now, the politics of our two nations have led netizens and elites to engage in fierce debates over who is a hillbilly.
From 1980 to 2016, the richest 1% captured 27% of global income, while the bottom 50% received only 12%. Even more shocking: in the three years following the 2008 financial crisis, the top 1% in the U.S. took 95% of all new income. These numbers are staggering. These issues have been accumulating over time. What was once considered the consensus on globalization in the United States has now become a target of alternating attacks between its two political parties. Consequently, the U.S. is now leading the charge in deglobalization and anti-globalization movements. The very globalization model it designed is now being dismantled by its own hands. The American political response has been to advance deglobalization and decoupling under the banner of national security, exemplified by measures such as the National Defense Authorization Act and the CHIPS and Science Act, which designate China as a comprehensive strategic threat. Europe has followed suit with similar policies - the EU's Strategic Outlook on China for the first time labeled China as a systemic rival, while pushing for decoupling in intellectual property rights. These actions represent precisely what we discussed earlier: core nations of the previous wave of globalization, now anxious about their unstable positions and feeling threatened, are essentially building protective fences around themselves.
Facing these structural shifts in the global landscape, China has undergone a fundamental transformation in its economic growth model since the 18th CPC National Congress over a decade ago. Our generation has lived through this transition, experiencing its considerable growing pains. During this period, the traditional growth engines of real estate and consumer internet have gradually given way to a new innovation-driven paradigm. Strategic emerging industries - including advanced manufacturing, bioscience, semiconductors, and green energy - are now forming the second curve of China's development model. These sectors, powered by technological innovation as the new productive force, are poised to become key drivers of the next wave of globalization.
The data illustrates this remarkable transformation: China's share of global R&D expenditure surged from 5% in 2000 to 22% in 2019, growing at an annual rate of 7%. Projections suggest China will soon overtake the United States to become the world's largest investor in scientific research. In 2023, China published approximately 830,000 scientific research papers, surpassing the United States for the first time in the Nature Index. With 3.7 million STEM graduates annually, 40% of whom specialize in science and engineering disciplines, China possesses an enormous talent foundation. These indicators demonstrate that China is no longer merely a follower in new technologies—though we remain in catch-up mode in many areas, we have become a leader in numerous fields.
Driven by technological innovation, China has undergone a significant industrial transformation over the past decade, shifting from low-end manufacturing to high-tech-driven industries. Today, China plays a pivotal role in global manufacturing, accounting for roughly 35% of global industrial capacity—more than the combined share of the U.S., Germany, Japan, and India. This scale is immense. However, the value-added ratio of this capacity has historically been low. China’s manufacturing output ranges between $5–10 trillion, yet the value-added portion is only about 12%. To put it in corporate terms: if this were a company, $5–10 trillion would be its revenue, and 12% its gross margin—a relatively low figure. By comparison, during the 1960s and 1970s, when the U.S. was the world’s largest manufacturing power, its gross margin stood at 35–40%. Within this enormous base ($5–10 trillion), increasing the value-added margin from 12% to 35–40% represents a massive wealth creation opportunity. China is pursuing this through two key strategies:
1. Technology-Driven Industrial Upgrade, including infusing advanced technologies (AI, automation, IoT) into existing manufacturing to boost productivity and value-added margins.
2. Innovation-Led New Industries, including developing cutting-edge sectors such as new energy, synthetic biology, and semiconductors. Semiconductors, in particular, have become a necessity due to geopolitical constraints, but they also represent a major emerging industry.
Why is the Global South so crucial? Over the past two decades, China hasn't just been upgrading its industrial value-add and restructuring its economic framework - we've also made massive investments across the Global South, spanning from physical infrastructure to digital transformation. The strategic significance lies in this reality: the Global South accounts for 60% of global GDP growth. Our investments there have thus evolved far beyond mere trade expansion - they represent a comprehensive, systematic industrial realignment.
One statistic speaks volumes: The majority of China's greenfield investments are concentrated in emerging markets, with China becoming the largest source of such investments in recent years. Over the past eight years, Chinese companies' revenues from the Global South have surpassed those from the Global North. This strategic positioning has not only accelerated industrial upgrading across the Global South but also injected new momentum into the global order. In technological development, China is promoting open-source models in fields like AI and semiconductors - an approach fundamentally different from the tech development paradigm of the previous globalization wave, being more open, inclusive and lower-cost. This enables many developing countries to access scientific achievements. Where AI industrial applications were previously dominated by leading platforms making substantial profits, the open-source movement is dramatically reducing application costs in industries. Thus, through technological innovation, China is advancing a model of shared, open and inclusive development and prosperity worldwide, particularly in the Global South.
To summarize, the previous wave of globalization—the one that may now be coming to an end—rested on three core pillars: American capital and technology, Chinese manufacturing, and global markets. The new wave of globalization we are initiating—what we call reglobalization—will likely be built on a different triad: Chinese capital and technology, worldwide manufacturing, and global markets.
Thank you.
