Int. J. Financial Stud. 2020, 8, 7; doi:10.3390/ijfs8010007 www.mdpi.com/journal/ijfs
Global Economy: New Risks and Leadership
Viacheslav M. Shavshukov 1 and Natalia A. Zhuravleva 2,*
1 Saint-Petersburg State University, 62, Chaikovskogo Street, 191123 St Petersburg, Russia;
2 Emperor Alexander I St Petersburg State Transport University, 9, Moskovsky Pr.,
190031 St Petersburg, Russia
* Correspondence: firstname.lastname@example.org; Tel.: +8-(812)-310-09-06
Received: 18 December 2019; Accepted: 22 January 2020; Published: 4 February 2020
Abstract. After the global crisis of 2008–2009, the world economy entered the era of restructuring.
This article focuses on the risks that a new leader will face in the process of shaping the world
economy. The methods employed in the research include big data processing of continuous change
and the results of the symmetric macroeconomic analysis based on the statistics collected by the
International Monetary Fund (IMF), The Word Bank (WB), Bank for International Settlements (BIS),
Central banks and Treasuries. The study results proved that the recessionary processes, their depth
and global nature, are caused by a combination of world financial system crises and general
civilization problems. These new systemic risks for the world economy might result in new global
crises that will limit the resources of international financial institutions for sustainable development.
Besides, for most banks these crises will mean shifting a big share of derivatives to the off-balance
liabilities, using Special Purpose Vehicle (SPV) in deals, followed by an increase in state and
corporate debts, trade wars, a slowdown of economic development in China, and widening
contradictions between global and national finances. Regular research and systematization have
developed certain guidelines for the global economic restructuring process. First of all, it is
recommended on the base of interstate compromises to focus on international agreements to ensure
a solid foundation for global finance. On the basis of the comparative analysis carried out for the
USA, China and other counties, it was made clear that no one leader in world economy in 21st
century views the world reserve as based on the currency of one country only. Instead, there will be
a slow transition to using Special Drawing Rights (SDR) with a basket from 15–20 currencies G20.
Keywords: world economy; nature of global crises; risks of the financial markets; leadership
JEL Classification: F3; F43; F6; F63
The global crisis of 2008–2009 and long post-crisis recession have raised questions about the
future of the world economy. This future depends on the interaction of the world economy and world
politics, the directions of their development and the nature of interference. The history of the last
decade showed that modern civilization is in a general crisis. It covers the economy, policy, culture,
ecology, and in general, the human. The movement of world economy since the beginning of the
1980s towards the global, financial, and economic environment and a system came to an end with the
global crisis and ten years of slow recession, formation of a tendency to deglobalization and
dedollarization. Obvious achievements of globalization, large trade, and investment agreements are
called into question. Efforts of the World Trade Organization (WTO), BIS, regional unions, and global
Int. J. Financial Stud. 2020, 8, 7 2 of 17
infrastructure institutes are cancelled out by populism, trade wars, and a new approach to world
order. Attempts at an audit of the developed architecture of the global economy cause concern in the
international academic community. Thinking of the crisis of civilization, we address the reasons and
the nature of the global crisis of 2008–2009 and the decade of post-crisis recession again.
The first crisis of the century is viewed as a crisis of the basic elements of global finance. The
international markets of financial assets failed to regulate themselves, and aggravated conflicts
between global and national finance. During the years 2010–2019 the world economy faced the risks
of a post-crisis period. Deglobalization and dedollarization processes questioned the previous
philosophy and world economic leadership. The authors present their point of view on the processes
of globalization and risks to sustainable development and leadership problems in the world
The purpose of the article is to reveal the deep nature of the global crisis of 2008–2009, the post-
crisis recession, the weakening of interest rates in 2010–2019, new risks of the world economy,
problems of the new leader. Research tasks and problems: 1. Justification of the concept: “The global
crisis is a combination of civilization problems and imbalances in the functioning of elements of a
world financial system”. 2. Identification of the legal base of the global economy and finance. 3.
Systematization of risks for national and world economies. 4. Comprehensive consideration of “a
problem of the new leader” for the world economy.
The research leans on a number of methodological principles. The principle of ascension from
concrete to abstract and back has allowed revealing important regularities and communications.
Global crisis and post-crisis recession are considered in terms of the deep social and economic nature
and the phenomena which are on the surface. Their combination defines the start of a crisis phase of
a cycle, its depth, and scale. Moreover, they are analyzed as roots of modern economic problems and
contradictions. Consideration of the mortgage crisis as the main cause of the global crisis does not
explain its depth, scales, and 10-year post-crisis recession. We show that a combination of crisis
elements of the world financial system (including mortgage) and the deep nature (transition to a new
technological way, a call to solve of civilization problems) made the crisis nature, complexity, and
duration of its overcoming.
The principle of systemic. Global crisis 2008–2009, as well as all smaller global crises, starting
with Mexican (1994) and the Southeast Asian countries (1997), was a product of the global financial
and economic environment and a system. Their cradle, national economy and its critical unbalance.
The external factor, FDI and its withdrawal from the country is a factor which aggravates crisis
processes but does not initiate them. Two traditional markets of financial assets saved a global
investor, currency (USD, JPY, CHF) and gold (including stocks of the gold mining companies).
Therefore, the deep nature of crisis caused problems of post-crisis recession.
The authors suggest using the principle of determinism according to which the nature of crisis
and post-crisis 10-year recession is considered as a root of modern economic problems and
contradictions, but the directions of its permission allow to consider its use.
The analysis of continuous changes (as principle) was used to assess the soundness of currencies
of peer groups. Assessment of volatility and reliability of currencies is methodologically carried out
by means of comparative analysis of four euro currencies and four currencies of the developing
economies on BIS REER base with the horizon of the analysis of 1994–2018.
The research uses various methods of analysis: big data processing, method of group, SWOT
analysis. The leadership problem in the world economy for the 21st century is methodologically
solved with the help of the criteria of four groups: (1) Size of the economy (GDP), (2) quality of life
(GDP/per capita, quality of life index, purchasing power, index security, index health care, cost of
living, real estate price per income, time in traffic, jam pollution index, climate index), (3) global
competitiveness (productivity, global innovation index) and (4) currency (weight, SDR basket, share
in global payment, volatility). The research used a method of quantitative analysis of macroeconomic
Int. J. Financial Stud. 2020, 8, 7 3 of 17
indicators according to databases and analytics of the IMF, WB, BIS, the central banks, and the
ministries of finance.
3. Main Results
3.1. The Nature of Global Crises, Post Crisis Recession and Problems of Growth of Modern World Economy
The global financial and economic crisis of 2008–2009 and a long post-crisis recession have raised
a lot of questions for world economics, monetary authorities, international economic institutions, and
businesses about the future of the world economy and the structure of global finance in the XXI
century. The first question concerns the global financial and economic crisis of 2008–2009 and its
origins: Whether the first world crisis of the XXI century is a crisis of the financial system based on
the monetarism model and technologies of the XX century, or a crisis of its separate elements?
There is no single answer to this question. Our analysis has shown that the most likely
explanation lies in the nature of globalization. Globalization of the financial markets has allowed
capital to move freely all over the world, which made its taxation and regulation at the national level
more complicated. Financial capital, unlike industrial, has easier access to the national markets and
to credit organizations, interest and non-interest revenues. The experience of free capital flows in the
80s has shown that the global investor is capable of deep crisis processes in the national economy.
Therefore, the monetary authorities are compelled to trace and control the foreign capital flows more
closely than the national. The global financial and economic crisis has aggravated these contradictions
between global and national finances.
The global financial system is an unstable system and it is based on the assumption that
international financial markets are regulated by the «market fundamentals» and an «invisible hand»
of free competition. However, under the pressure of crisis the system, which did not have prudential
regulation, it failed. It seems, though, that it is not the system of global finance itself that originated
the global crisis, but the poor operation and coordination of its separate elements and institutions.
The IMF, the major institution of global finance, has insufficient credit resources with a deficit of $500
billion and tends to ignore the role of China, Russia, India, Mexico, Brazil, and some other dynamic
countries in the world economy. The world currency system remains unstable because of the
weaknesses of dollarized economies, while commodity markets are unbalanced by the fixed rate of
the Yuan. Multinational banks (MNB) have insufficient capital adequacy according to Basel III and
free capital, a big share of short positions in the investment portfolio, more than $600 trillion in
derivatives (about 800% world GDP), out-of-balance liabilities, besides the use of depositary accounts
in trading operations. Some have been spotted money-laundering through their offshore branches
and taking risks in fiduciary deals.
The markets of financial assets also had weaknesses. The money market has an insufficient level
of syndicated crediting in emerging markets. The debt capital market used Special Purpose Vehicle
(SPV). FOREX gained money from real assets markets: Ultrahigh profitability increased volumes of
speculative deals: Turnover reached 75% ($3–4 billion a day). On the stock market, numerous short-
term operations (up to six months) made it more difficult to determine a fair price when estimating
capitalization of the companies.
The monopolization and oligopolies of the rating and auditor service market resulted in a whole
network of errors: The crisis of 1997 in South Asian countries, a default of 1998 in Russia and the
global crisis of 2008–2009. Problems of national financial security remain unsolved. There is an
excessive public debt: 200% against 60% forecast by the UN, IMF, and EU. The cumulative tax and
gross national product ratio is 60%–80% against an optimum value of 15%–30%. There is also a
problem of money surplus sterilization.
3.2. Legal Basis of Global Economy Regulation
The global economy cannot function without infrastructural institutes, the international
agreements and regional associations which regulate relations of the parties. We investigate
questions of legal bases of systems of regulation and management of risks in the world economy. The
Int. J. Financial Stud. 2020, 8, 7 4 of 17
second key question of the post-crisis world financial system is that of its regulation. What should be
the basis for the international financial system: National sovereignty and protectionism or
international regulation? There are two possible solutions. The first is the construction of the system
of international regulation on the basis of national sovereignty. Even though national central banks
adapted Basel standards of capital adequacy, it did not prevent governments from taking
protectionist measures. For example, after an actual default of Iceland, the Central Bank of Norway
reduced trust in the banks of that country, and the central banks of Eastern Europe revised the
requirements for banks with foreign capital. The UK parliament’s independent commission
suggested a buffer by creating reserve capital at a 3% rate for the big retail banks. FRS (the Dodd-
Franc Act) and the Bank of England introduced restrictions for speculative operations with securities
for commercial banks. The Central Bank of Switzerland did the same for the international investment
operations of the major banks. ECB placed a temporary ban on operations of banks operating short
positions (The Economist 2011).
The second solution is international regulation, which should (unless it conflicts with national
economic interests) prevail over national regulators. Otherwise, it might lead to speculations on
different regulation conditions in different segments of the markets. Businesses and assets might
move to the countries with the most attractive investment climate and mildest regulation. The success
of globalization has been connected with the liberalization of currency legislation, i.e., with a decrease
in the level of national regulation. However, the crisis has demonstrated that market fundamentals
have not been a bulwark against international financial market crashes. Therefore, it is extremely
difficult to convince the monetary authorities of countries to give preference to international
regulators rather than national ones.
In the 1980s governments rejected national financial protectionism, but it did little to help to
overcome the consequences of the financial and economic crisis of 2008–2009, while processes of
deglobalization and dedollarization have been accruing. The open economy should still prove that it
has more advantages than a closed one and international regulation of the system of global finance,
with national markets and finances, should prove its efficiency. The Basel standards of capital
adequacy, IAS, SWIFT should be expanded. Thus, the international regulation of the global economy
can be more effective, but in conditions of deglobalization, aspirations to regional associations such
regulation can be a result of only compromises of the countries on a being and the form (to the
preference, procedures, voting, arbitration). However, during post-crisis, recession contradictions
between the global and national finance are increased. The global investor ignores national economic
interests. Global problems (ecological, power, and food security) are not solved, but can provoke
trading wars and protectionism. The insufficient volume of investments for the decision of common
global problems is more than $35 trillion that makes about 50% of world GDP. The WTO, out-of-date
procedures on voting, arbitration, preferences for the developing countries in the developed markets,
cannot resist to trading wars and sanctions. Thus, the system of the global economy needs revision,
updating, and expansion of regulators according to the international bank standards, international
agreements, the best cases of globalization (such as uniform anti-recessionary policy G20).
3.3. Risks and Threats for World Economy and Finance (2010–2019)
At the end of 2009—beginning of 2010 the majority of G20 countries announced that they had
overcome the global crisis. However, the post-crisis period had its own new risks. They became
threats to steady development and can provoke a new global crisis. Our analysis of systematized
risks has revealed new threats to sustainable development.
Rates decrease risks in the development of the world economy.
Our research has shown that during the post-crisis period (2010–2018) average annual growth
rates of the world economy were 3.44% (with a range of minimum values from 3.4% in 2015–2016 to
the maximum 5.4% in 2010). Substantially, it became the result of long, soft, national, and regional
anti-recessionary programs with the offer of money at a low percentage rate and repayment of bank
debts. In January 2017, the FED stopped the Quantitative Easing Program (QE) and transferred to a
policy of increasing discount rate. In 2018, the ECB also finished the QE (2010–2018) program of
Int. J. Financial Stud. 2020, 8, 7 5 of 17
redemption of state securities for the sum of €2.6 trillion. In spite of the fact that thanks to QE
developed economies reached the level of 2.2% of growth, the effect for the world economy was 3.5%.
It reached considerably to the capacious markets of the EU, the USA, and also FDI in the developing
However, the steady growth of the world economy was not reached nor provided with either
national or international programs. In 2019–2020, the IMF predicts a decrease in growth rates to 3.3%
and, most importantly, a delay of rates in 70% of national economies (Lagarde 2019).
Rates of economic growth have several aspects of the analysis and algorithms of actions of the
monetary authorities. First, a clear understanding of the nature of the decrease in growth rates and
the elimination of the reasons lying on the surface, and components of the current agenda for
economic policy is necessary. Secondly, and most importantly, the problem of long-term steady
growth connected to factors of the uncertainty and complexity of the solution of civilization
Are the current reasons for delay of growth strengthening tensions in world trade, and
toughening, by many countries, financial conditions for business? The solution to these problems lies
in the plane of a smooth transition to such monetary policy which will provide only unstable
economic development of the world economy in the ranges of 2%–4.5%, the developed countries of
1%–2.5%, and the developing, 3%–5%. Sharp actions of the monetary authorities at the rates of the
money market and taxes, most likely, will lead to problems of refinancing and service of the state and
corporate debts will enhance volatility (nervousness of the markets and change of trends) of exchange
rates and the bid-and-asked quotations of financial stock market instruments.
In emerging markets and softer monetary policy financial terms and conditions for the national
capital, FDI can improve state priming of the economy. The outflow of FDI during the period from
2015–2019 began to break the balance of emerging markets that developed as a fruit of the global
financial and economic environment and system.
The model of a monetary policy resulted above can provide only unstable growth which is
vulnerable in the face of geo-economics conflicts between countries, for example, Brexit for EU and
U.K. Sustainable growth is caused by more general factors of uncertainty and the beginning of the
solution of civilization problems. Considering factors of uncertainty, we will note, first of all, high
level of debt of countries (the number of countries with a state debt of 100%–200%/GDP growth) and
the companies with high financial leverage that is making them unstable, and reducing time to a
possible default. The tension in world trade increasing after 2010 became another factor of
uncertainty: Conflicts, disputes, mutual claims, and sanctions, wars by duties and threats. The system
of the WTO, the procedures, rules, agreements of its participants, cannot extinguish a wave of
aggravation of trade contradictions. The most important infrastructure institute of the global
economic environment does not work.
According to the history of international regulation of world trade since 1947 (GATT and the
WTO), the reduced average world sales duties from 55% to 2%–3%, demonstrates that free trade and
low trade barriers are a benefit to all countries. Probably, the modern crisis of a global system of trade
will be solved on the issues of state subsidies to participants of foreign trade activities, creation of
effective systems of protection of intellectual property and confidential data. There are good
prospects at digital commerce in terms of fair competition and equality of conditions. There will be a
modernization of the major institute of the WTO in its main functions: Negotiation procedures and
permission of trade disputes.
Crisis and a post-crisis depression started the deglobalization mechanism and created a trend of
leaving the multinational corporations from emerging markets. It is important to carry items
favorably still (these are 50% of the World GDP). However, in the system of trade, there are
distortions which cause contradictions between countries. These distortions will always arise as a
result of the decrease in prime cost in production and logistics. However, trade barriers are not the
permission of trade contradictions. Moreover, trade integration stimulates investments into port and
trade infrastructure and warehouses, and creates new jobs (WEO April 2019). Estimates of the IMF
growth of tariffs (this analysis covers tariffs, non-tariff measures, and bilateral agreements about
Int. J. Financial Stud. 2020, 8, 7 6 of 17
purchases) by 25 percentage points on all goods in trade between the USA and China can lower
annual GDP in volume to 0.6% in the USA and 1.5% in China (WEO April 2019. Chapter 4).
Drivers of the world economy. The global economy provides no answer to the question of how
economy and strata might promote the growth of the world economy. The middle class of the
developed countries and emerging markets seems to function as its locomotive. The world economy
needs modernization of the global financial system, an introduction of additional regulators, new
world reserve currency (Euro, Yuan, CDR, or other currency) and improvement of the risk control
system of market derivatives (total derivatives averaged $659 trillion in the period 2009–2018, with
768% of world GDP) (BIS statistics. Exchange-traded derivatives (OTC derivatives) 2019). Thus, from
the point of view of micro-economics, the key problems of economic growth have not been solved
despite the optimization of business processes and change of business model.
Risks of public debt growth. There was a growth of cumulative state debt/GDP from 78% in 2007
to 118% in 2014 (Lipssky 2010). In 2016, the global debt made $164 trillion (225%/World GDP) (IMF
Fiscal Monitor 2018), which is higher than the national economic safety level.
Chinese economic slump. Delay of growth rates of real GDP of the second economy of the world
poses a serious threat to the steady growth of the global economy. Before the global crisis of 2002–
2007, growth rates in China were 9%–14%, during the crisis they fell by up to 9.4%, and since 2010,
they have consistently decreased by the rate of 1% a year and were, in 2018, 6.6% with the forecast of
the IMF for 2024 at 5.5% (IMF WEO 2019). Historically, a decrease in economic growth in China to
6% might affect the world raw material and capital markets. The national economy is overheated by
cheap credit. Loans to private sector in China averaged 9794.11 CNY HML from 2002 until 2019,
reaching an all-time high of 46015 CNY HML in January of 2019 (and a record low of −974 CNY HML
in October of 2005), i.e., increased by 2.6 times compared to 2010 (20000 CHY HML) (Trading
economics. China 2019). As a result, the economy faced two waves of increase in prices of the supplies
(PS): In 2009–2012 and 2016–2017 that demanded monetarist efforts of the People’s Bank of China on
The financial sector of the Chinese economy achieved liquidity, but the real sector failed to
demonstrate steady growth. The increase in state expenditure on social programs, maintenance of
social stability, innovative programs increased state budget, state debt and tax burden for businesses,
might start the inflation flywheel. The economy of China with its limited internal demand, a surplus
of liquidity, increasing incomes of business and population, and poor quality of production will face
inflation growth, and a decrease in economic growth and competitiveness. The ambition to become
a new world economic and technological leader with Yuan, as a new reserve currency, will be
postponed for 10–15 years. Therefore, the People’s Bank of China will continue to support the current
world reserve currency.
3.4. The Leader for the World Economy in 21st Century
After the global crisis, the processes of dedollarization and deglobalization intensified and raised
the question of who will be the leader of the world economy. Will the US maintain its leadership, or
will it be replaced by China, the EU, Japan or others? Change of the leader of the world economy
means deep re-structuring of all systems of the global economy and finance. We start with a high
urgency of this question for 21st century and have carried out comparative analysis of the USA and
China, and also other economies by following four key criteria: The size of economy, quality of life,
competitiveness, and soundness of currencies.
Comparative advantages of the U.S. economy. The USA, being one of the main architects of
globalization, has benefited the most. In the 1980s, the USA managed to make its stock market
attractive for foreign banks and investors. As a result, the net capital inflow increased from $19.4
billion in 1980 to $153 billion in 1987 and $324.5 billion in 2008 (U.S. Census Bureau 2012). It
strengthened the position of the USA in the global economy, increased the country’s share in the
world GDP from 25% to 30% and market capitalization from 30% to 50% ($12.5 trillion) For the
current positions of USA see Table 1.
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Table 1. Comparative advantage of the USA vs. China (if other is not specified), 2019 *.
Forex USD/CHY, 12/06/2019
(3) Share of the
sectors of economy
in GNP, %, 2015
GDP, constant prices, $ trillion
GDP, current prices, $ trillion
GNP per capita, $ thousand
Unemployment rate, %
Wages per hour/per year, $,
Labor productivity, growth, %
The population share (at the age of 15 and
GDP deflator index
Inflation rate, %, YoY
Central Bank interest rate decision, %
Bank balance sheet, $ trillion
Loans to private sector, $ trillion
Current Account, $ billion, Q1
Imports, CIF, $ trillion
Gold reserves, tones
Net capital flows, $ billion
Government budget value/GDP, %
Government spending, $ trillion
Corp. profit, $ trillion
Market cost of publicly traded companies,
Private sector credit, $ trillion
Corporate Tax rate, %
Personal Income Tax Rate, %
Sales Tax rate (VAT), %
Social security rates for:
* Sources: Trading economics. China (2019), Trading economics. United States (2019), Intertrade
In 2019, the size of the USA GDP (GDP, current prices) was $19.390 trillion (in China for
comparison is $12.380 trln), that, on the one hand, allows provision of a high quality of life: GDP/per
capita $54.225.56 (in China $7320.09), with another—stable expenses of the Government of $$3.21
trillion (Hereinafter Table 1. Items 2, 9). Rates of economic growth were 3.20%, that corresponds to
an average value during the period 1948–2019 (the highest level of 13.40% was in 1950, the lowest
during the global crisis of 2009, −3.90%). The economy is not overheated and has the smallest
unemployment rate in 49 years at 3.60%. The contribution of various sectors of the economy to the
production of GDP reflects its readiness to enter the world of technologies 4.0. The USA
manufacturing industry creates 21.1% of the national GDP (in China 46.8%. See Item 3). At the same
time, the cost of its products grows due to complicated labor (2019 $2.2 trillion), and the share in GDP
falls. On the contrary, services (information, communications, financial and legal) as a portrait of new
technological revolution, promptly grow. In 2019 they created a cost of 12.9 trillion with a
contribution to the GDP of the country of 76.7% (in China 43.1%. See. Item 3). The structure of the
Int. J. Financial Stud. 2020, 8, 7 8 of 17
economy is modern, aimed at mastering the first high-tech. The increase in productivity of labor
(without agriculture) in 1Q 2019 (YoY) was 3.40% % (see Item 4), with an output of 3.9%, the index
of labor productivity 106.96 with an average for 1950–2019 60.65%. High-quality indicators of labor
productivity demonstrate a perception of the economy for new conditions of the economic policy,
with a transition to technologies of 4.0 and investment activity of business. The rate of inflation in
May 2019 was 1.8% (in China 2.70%. See Item 6), a fall in comparison with 2018, it is significantly less
than the average level of 3.26% in 1914–2019 that substantially is a result of the long-term strategy of
the FRS of cheap money. At the same time root inflation (the core inflation rate) excluding power and
food products was 2.0%. There was a growth of wages per hour to record $23.38/hour (Item 4) in
comparison with the average level of 11.24 USD/hour during the period from 1964–2019. As a result,
the AAA sovereign rating was in the first position (2018) on global competitiveness among 140
The essential weaknesses of economy in 2019 in the form of payment (−134.88 billion USD) and
trade (−50.79 billion USD) deficits, budget deficit (−207.77 billion USD), and public debt (exceeding
GDP (105.4%) are hedged by USD (as world currency, reserve, steady with small volatility), historical
lack of defaults of the state and big reserves of gold (8133.50 tons). At the same time, there is a real
threat to a country default to the beginning of each next financial (budgetary, fiscal) year by 1 October
2019 or next year.
The retrospective of these facts is that since 1991, the current account of the balance of payments
in the US was in deficit and increased from $12 billion in 1982 to $856 billion in 2006, it did not pose
a threat to the financial stability of the country (Table 1). The deficit was covered by foreign
investments, mostly from China and oil-producing countries. In 2005, foreign assets of American
residents amounted to $9.6 trillion, while foreign assets in the USA—$12.5 trillion, with the net
foreign investment at $2.8 trillion. In 2006, FDI into the USA reached $184 billion, with leading
investors being the UK and Germany (USA 2007).
Since the 80s the USA has learned and has got accustomed to living on credit. In 1980 loans
amounted to $909 billion (33.3% GDP), and in 2011—$14.972 trillion (99.7 % GDP) (see Table 1). This,
however, did not affect the investment appeal of the country and its sovereign ratings as the FED and
the US Treasury have never declared a default and have been serving its internal and external debts.
Besides, if weighing state debt against the market cost of publicly traded securities rather than against
the GDP it will account for 87.74%. not 100%. Moreover, the holders of 50% of obligations were non-
residents. For example, China, as the second economy of the world, was the main investor in
exchequer obligations and in 2006 it held T-bills for the sum of $801.5 billion. The American stock
market remained more profitable than the European (15% annual vs. 12%). In 2011 foreign residents
of the USA owned 11% of traded financial assets ($17 trillion), including credit market instruments,
US corp. equities, mutual fund shares, trade receivables (U.S. Census Bureau. Statistical Abstract of
the United States 2012).
Besides financing the US industrial and public debt, globalization benefits in the period from
1980 to 2011 included the growth of the net value of households (8.3% vs. 2%), gross national product
per capita from about $28 thousand to $54 thousand (see Table 1, Item 2) and a decrease in cumulative
tax for businesses from 18.2 % GDP to 15.2% (CIA 2012).
Comparative advantages of China’s economy. China, whose share in the world GDP in 2013
amounted to 12.22%, after the recession on international commodity markets, re-oriented towards
the domestic market. The strategy of two markets (domestic and foreign) yielded a result (see Table
2). Currently, in 2019, China is still the first nation on population, the extent of the international
liquidity, export, trade balance, and the second economy of the world on GDP (GDP constant prices).
China is already not just the “factory” of world brands, the Chinese companies led by Huawei have
become competitors of the world leaders in high-tech more and more.
Growth rates of the economy of China in 2018 developed twice as high at 6.40% (in USA 3.20%.
See Table 2, Item 1). Average growth rates of GDP during the period 1989–2019 were 9.52% (the
highest level of 15.40% was in 1993, the lowest 3.80% in 1990). Substantially, it was the result of the
Deng Xiaoping policy of modernization, the effect of globalization and involvement of FDI. However,
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despite the state support of output and aggregate demand (AD), it is difficult to support during the
post-crisis period, high rates which will decrease, first of all, against the background of a trade war
with the USA.
The historical background of the economic development of China in the 20th century caused the
low level of technological bases of the economy, finally, very low during the period 1960–2019 the
GDP per capita (PPP) of $1662.03. Growth of the important indicator of the quality of life, up to
$7320.09 in 2019 (in the USA $54225.45. See Table 1. Item 2), shows the effect of market reforms, a
mixed economy and the turn of economic policy towards domestic demand. Nevertheless, the
reached level of $7000 corresponds to only 58% of the average world value. The contribution to GDP
of the processing (quite often “smoky”) industry of China makes 34%. It will fall, but slowly because
China is a factory of the world economy.
Nevertheless, during 2015–2019, the share of services that already makes 57.59% in GDP of the
country is still growing. The unemployment rate of 3.67% (1Q 2019) is not high in comparison with
an average value of 4.09% for 2002–2019 and that demonstrates the transfer of focus to the domestic
market. In China, during the period 1952–2018, the average nominal salary/month was 1184.76 CHY.
In May 2019—8293.32 CHY ($1196.04), a growth of seven times. Great progress for the modern history
of the country, but in comparison with the leading economy of the world, the lag of nominal salary
in annual terms is 2.9 times. The rate of inflation in China in 2019 is not high, 2.7%, in comparison
with the average level of 5.16% during 1986–2019, a decrease of 1.9 times. This is evidence of the
effective work of the People’s Bank of China. In monetary and credit and investment policies, the
strategy of liberalization is traced: Consistently the interest rate falls, from 6% (2015) up to 4.35%
(2019) (Table 2. Item 8), the balance sheet total of the banking system ($465.8 billion), loans to
households, the credits to companies grows, FDI grow ($2019 54.6 billion with the rate of 3.5% per
At the same time, points of weakness of the economy are low, GDP/per capita (58% of the
average world level), the low salary, record deficit of the budget due to a decline in income of the
state, decrease in profit of enterprises in 14 branches of the economy of all forms of ownership, the
28th place in the list of global competitiveness and a high rate on the company on social taxes (37%
vs. 7.65% in the USA). At the moment, China is ahead of the US in export volumes ($2.14 of trillion,
first place in the world export of securities with a share of 11.7%), foreign reserves ($3.1 of trillion)
and total investments, with the positive balance of payments and state debt to GDP ratio 2.3 times
less than USA (see Table 2. Item 8).
Table 2. Comparative advantage of China vs. the USA (if other is not specified), 2019 *.
GDP growth rate, YoY, %
Core inflation rate, %, YoY
Forex reserves, $ trillion
Balance of trade, $ billion
FDI, $ billion
Retail sales, YoY, %
Exports, FOB, $ trillion
External Debt, $ trillion
The current balance of payments, $ billion,
including % of GDP
Total investments/GDP, %
State debt, $ trillion
State debt/GDP, %
Government revenues, $ billion
Government budget deficit, $ billion
Int. J. Financial Stud. 2020, 8, 7 10 of 17
Foreign reserves, $ trillion
Industrial production, YoY, %
Bank lending rate, %
Personal saving, %
* Sources: Trading economics. China (2019), Trading economics. United States (2019), Worldometers
(2019), US Population (2019).
Lastly, it is impossible to ignore the demographic factor’s role in economic growth. Despite the
absolute advantage of China in population (1395.4 billion people in China vs. 328.950 million people
in the USA) and comparable indicators of life expectancy (74.68 years vs. 78.37 years) (UN stats 2012)
the country will face a serious problem of a reduction in population, including an aging demographic,
in the middle of the XXI century (Table 1, Item 5). The USA, on the contrary, has a relatively young
population and, according to the UN forecasts, will have a higher population growth (1.4 times vs. 1
in China) in 2011–2050 and a larger share of young people (20% vs. 17% in China).
Since the purchasing capacity of the domestic market is considerably lower than the
international one, it leads to the consecutive GDP decline. Dynamics of decrease in rates of GDP
growth of the country is traced: From 14,2 % in 2007 to 6,3 % in 2019 (decrease in 2.3 times) (IMF
WEO/CHN 2019). Aggregate demand (AD) in China (as a share in nominal GDP) falls from 47% in
2003 up to 38% in 2015. The dynamics of the decrease in the country’s GDP growth rate are traced.
Steady growth, rates reduction began after 2007 (14.2%) and amounted to 6.3% in 2019, i.e., it
decreased by 2.3 times (IMF. WEO/CHN 2019). This suggests that in the conditions of declining
demand in the global markets after the global crisis, China could not support former growth rates of
GDP due to domestic demand. In spite of the fact that from 2011 to 2018 aggregate demand (AD)
grew from $494 billion to $914 billion, its average annual rates steadily decreased from 18.3% (2012)
up to 6.9% (2017).
At the same time, the household saving rate in China is much higher than in developed
economies. It was 37.10% in 2018 vs. 6.20% in the USA. Personal household income savings in China
averaged 33.48% from 1992 until 2015, reaching an all-time high of 39% in 2010 and a record low of
27.20% in 2002 (Trading economics. China 2019; Trading economics. United States 2019).
China’s household consumption is low, the ratio of consumption to GDP is 37% versus 50% in
the developed countries. What are the causes of this phenomenon and statistics? This partially reflects
China’s growth model, a high level of saving. The saving rate is 37.1% vs. 6.20% in the United States.
From 1980 to 2008 the ratio of private consumption expenditures to GDP decreased 1.5 times from
55% to 36% (IMF Working Paper 2010). To understand the pattern of income distribution between
savings and consumption in other countries, we will note that in South Korea, Indonesia, India,
Philippines this indicator is 50%–70%. Among the reasons of such model of consumption in China,
the IMF in a special research notes high economic growth, a demographic structure with an elderly
population, the insignificant number of the public companies (which would pay dividends) vs. state-
owned companies (SOC), weak state health programs, higher education, etc. (Baldacci et al. 2010).
The level of household savings in China fell slightly to 37.10 percent in 2015 from 38 percent in
2014, as the inflation rate was 2.7% (the average indicator in 1986–2019 was 5.16% with a decrease of
1.9 times). We can confidently predict consumption growth in China due to an increase in household
incomes (wages for 1952–2018 grew seven times to 1184.76 yuan). A high level of savings, part of
which goes to investments, financing works to increase consumption. The Chinese national economy
is based on the special economic zones created in the 1980s when transferred factories formed a
«factory of world brands». It is as yet unlikely to become a leader in technology, which requires an
innovative economy rather than copying production. In 2013 China produced $9.240 trillion GDP
and there is a high risk of recession and an increase in inflation. The Chinese Yuan can be a strong
currency for mutual transactions inside BRICS, but it is not strong enough for the global commodity
and financial markets.
Other candidates for the role of the leader of the world economy.
Int. J. Financial Stud. 2020, 8, 7 11 of 17
Japan, which in 2018 had a contribution to world GDP of 4.1%, Germany (accordingly to 3.2%)
and Euro Area (11.4%) cannot compete with the United States (15.2%) and China (18.7%) (IMF WEO
2019). Japan still tests an echo of recession of the 1990s and the global crisis, EU zone constantly is in
2009–2019 under the blow of various waves of recession, connected in particular to debts of the
Mediterranean countries. The slow recession of the European economy turned out to be more painful
and difficult than in the US, as countries were attempting to shift to the new technological mode of
production. Germany and France are burdened by their obligations to preserve the European Union
and maintain the Euro and, thus, cannot become new world economic leaders yet.
It is possible to continue to search for arguments in favor of a particular country. Despite the
urgency of the question of leadership, there are also civilizational problems of the Mediterranean
countries, a migratory crisis in the EU, Brexit, the populism breaking the architecture of national
economies and geo-economy. Their solution is only possible if G20 and international economic
organizations take joint actions to create conditions for global financial stability and search for new
sources of economic development. In substantiation of the given thesis, we will consider the criteria
of leadership in the XXI century and requirements of the leader.
In a substantiation of the given thesis, once again it is reversible to criteria of leadership for the
21st century and to requirements to the leader, but at different level of the analysis. We concretized
four criteria of leadership: (1) Size of the economy (GDP), (2) quality of life (GDP/per capita, quality
of life index, purchasing power, index security, index of health care, cost of living, real estate price
per income, time in traffic, jam pollution index, climate index), (3) global competitiveness
(productivity, global innovation index), and (4) currency (weight, SDR basket, share in global
payment, volatility). By these criteria, we carried out the analysis on the big sample of the countries.
We were guided by macroeconomic indicators of IMF, WB, BIS as criteria and received following
results. Based on the size of the economy (GDP nominal) in 2016, 2020, 2030, and 2050 there are four
countries among the leaders—the USA, Japan, China, and India (IMF WEO 2016). Quality of life is
traditionally estimated as GDP per capita with the same leaders of the USA, China, and Japan. If we
include such indicators as quality of life, purchasing capacity, safety, health services, life cost, and
ecology, then it would be Denmark, Switzerland, and Australia. If global competitiveness of the
national economy depends on the competitiveness of businesses, quality of corporate government,
production efficiency and management, here the leaders are Switzerland, Singapore, and the USA
If the major indicator of business competitiveness is labor productivity calculated as GDP
(PPP)/per hour, then according to this indicator, the leaders are Norway, Luxembourg, and the USA.
The world economy in the XXI century will be based on technological innovation. The global
innovation index, 2015 shows that in R&D (research and development) the leading countries are
South Korea, Israel, Finland, Sweden, Japan. In the innovative production—Switzerland, Ireland,
Singapore, Germany, Austria. In the quantity of high-tech companies—Unites States, China, Japan,
South Korea, Canada. In higher education – South Korea, Russia, Finland, Israel, Ukraine. Scientific
research—Finland, Iceland, Denmark, Israel, Singapore (Bloomberg 2015).
The national currency is a very sensitive indicator of the stability and strength of a national
economy. The most significant indicators are the transaction currencies, international liquidity,
reserves, and SDR basket. On 1 October 2016 weights of the five currencies in the new SDR basket
were: U.S. dollar 41.73%, Euro 30.93%, Chinese Renminbi 10.92%, Japanese yen 8.33%, Pound sterling
8.09%. Compared to the previous period the USD lost in weight from 44% to 41.73%. For the first time
CHY was included in the SDR basket and won the third position ahead of the Euro, JPY, and GBP.
Markets value currencies through SWIFT, by carrying out basic calculations on real and financial
assets markets. The USD share amounts to 44.64%, Euro—28.30%, GBP—7.92% (Swift 2014). The
major reserved currencies are the USD, Euro, JPY, GBP, and CHF as they are less volatile and more
stable according to BIS REER (2018).
The research shows a very important result, that today there is no absolute leader in the world
economy. Many countries possess comparative advantages (as it can be seen in the comparison
between China and the USA), but only in some positions. The age of the absolute domination of one
Int. J. Financial Stud. 2020, 8, 7 12 of 17
super state is over. The structure of the global economy and finance will not be based on the
domination of one country and one currency. International economic and financial organizations will
play a major role as global institutes and regulators. We do not exclude the possibility of the
establishment of a world government at the end of the XXI century. In the interim period, we might
expect an aggregated SDR with a basket formed by 15–20 currencies and the appearance of local
currencies on the wave of deglobalization and dedollarization.
Nevertheless, today the USA, EU, Japan, Great Britain, China, Russia, and India perform a
special role and responsibility. The world economy might receive a new impulse of growth if the
USA overcomes its own financial imbalances caused by the three deficits—budget, balance of
payments, and state debt—and becomes «a world workshop» of new high technologies. Japan as the
third world economy might repeat its “economic miracle” with the development of high-tech. China,
BRICS, and other countries of emerging markets with a high balance of payments surpluses and
extensive foreign reserves might become key sources of world economic growth too, if they re-orient
production towards domestic demand and consumption. The IMF and the World Bank Group should
be focused on maintaining global financial stability, searching and supporting new sources of growth
of the world economy and solving the civilizational problems of mankind.
The historiography of a subject is so extensive that it demands special analysis. For the purpose
of our research, we will be limited to some generalizations of scientific discussions. The problematics
of the new phenomena in the world economy is so complex that it requires a separate study of its
concepts, ideas, and approaches. The Bretton Woods Institutes noting 75 years, and being some of
the architects of the global economy, distinguish three main problems: Economic growth, tension in
world trade and the lack of confidence between national and global finances, national and
international institutes. The IMF, in official documents and research, sees necessity in its own
reformation (Tooze 2019, pp. 30–1), world cooperation for extraction of advantages in cross-border
flows of the capital and goods (Raghuram 2019, pp. 18–9). The World Bank offers innovations in rules
of the WTO in the multilateral system of trade (Goldberg 2019, pp. 20–3).
Another key institute of global finance—BIS—looks for a better balance between monetary
policy, structural reforms, fiscal policy, and macro-prudential measures (BIS 2019a) Annual report
2019, Lamers et al. 2019, pp. 17–18, 28). In focus of the analysis and the recommendations of a problem
of reliability of banks and bank systems, inflation and deflation (Mehrotra and Yetman 2018, pp. 83–
4; 91–5), new phenomena of financial deglobalization in banking (McCauley 2017, pp. 12, 14, 16, 18,
20; 2019, pp. 125–127).
One of the central problems in the world’s academic agenda is sustained economic growth which
is considered through a prism of world, regional, and national economies. What research attracts
interest? Inter-country inequality as an essential brake on the world economy (Fuller and Dwivedi
2019, p. 7), stability of all EU Member States as key to the economic growth of all the union (Popescu
et al. 2017, p. 73), use of the capacity of G20 for sustainable development (Esty 2017), the “green”,
ecologically focused economy (Popescu and Ciurlau 2016, p. 79), a search of the most effective models
of management of country financial systems on the basis of the comparative analysis of the best cases
(Zogning 2017, pp. 55–6), use of opportunities of global transport systems focused on “time is an
economic category” (Zhuravleva 2017, p. 123) and flexible monetary policy in the conditions of high
volatility of the international commodity and foreign exchange markets (Bikar and Sedliacikova 2018,
pp. 30–1) for country’s economic growth.
The threats of a new global crisis, risks of state and corporate debts are the subject of monitoring
and the analysis of IMF, the auditor companies and rating agencies, special research. There are
already many such works and official reports. However, we will note that the IMF is not decided on
the problem of corporate debt. A debt in different forms (accounts payable, accounts receivable,
overdue debt) is organic for the business in general and for corporate risk management. As Kliestik
et al. (2018, pp. 112, 121) showed in their research of risks bankruptcy on the database of more than
62 thousand companies in the Slovak Republic, the indicators of “debt” play a very essential role. In
Int. J. Financial Stud. 2020, 8, 7 13 of 17
the correlation model of “Risk bankruptcy” (corrected for 2/3 companies) “Current Debt Ratio” and
“Financial Debt Ratio”, there are among 14 indicators very high P-Value 0.30678 and 0.149362
respectively. This is the fourth weight value in the correlation model after indicators of return and a
turnover. If the corporate debt is a component of everyday risk management, then the massive
growth of defaults means an imbalance not in the companies, but in the external environment—in
the economic system. The business model has changed. For this purpose, it requires correlated
research between a company’s “financial health” and external factors, including business regulation,
tax laws and FDI outflow (Kliestik et al. 2018, pp. 800–801). Problems of change of technological bases
of the economy of Technology 4.0 are the cornerstone of the true and future aspects of macro and
microeconomics. Generalization of effects of digital technologies, smart-contracts, chain networks
deserves attention (Tuffnell et al. 2019, pp. 9–10) and product decision-making information systems
(Lafferty 2019, p. 20).
The science, the international institutes, and the markets were under the illusion that the global
economy is incapable of allowing a global recession, but illusions still take place. Therefore, the
subject of crisis is relevant today. In this regard, a certain interest represents research about the effects
of harvest on recession in the USA and China (Chang et al. 2019), relending of the private sector
(White 2010) and financial aid programs of the IMF during Asian crises (Shin 2017).
The problems analyzed above are important aspects of a more common problem — “Globalization
or Deglobalization”. The historiographic boom for dilemma arose after the global crisis of 2008–2009.
Contradictions between global and national finance became aggravated. There were new phenomena
in the world economy and economic policy of the states. Processes and aspiration to regionalization,
and thirst for regional economic associations are amplified. The architecture of global economy and
finance cracked: Central banks reduced USD share in their international liquidity, payments
increased in not reserve currencies, investments into U.S. T-bills decreased, FDI is leaving emerging
markets, agreements on trade and investment partnership, tariffs, compromise agreements within
the WTO began to be revised. Cryptocurrencies appeared as an alternative to traditional money and
became threats for Central Banks, systemic banks, and international payment systems.
The new phenomena of de-globalization found reflection in academic science. Key questions
became a subject of the analysis: The possibility of de-globalization, throw prism of “nature of
manufacturing” (Livesey 2018, pp. 180, 183), “measuring of new realities: Dynamics of imports and
exports of goods and services at a global or regional level, dynamics of expats’ money remittance,
inflows and outflows brought by foreign direct and portfolio investments” (Postelnicu et al. 2015, pp.
4–5), threats to sustainable economic development (Zuindeau 2012), influence of Brexit and Trump
policy “as a reversal… globalization process” (Martin 2018, pp. 65–66).
The new trend of the world economy introduces amendments in economic policy of the country
and corporate management. How do they change? “The new revised economy” already became an
object of research. Some of the sticklers of deglobalization are Bello (2002, pp. 69, 71, 108, 112) and
Khor (2001, p. 117), exact review of these books was provided by Hartwick (2006, pp. 262–263). The
anti-globalists brightly and fairly systematize contradictions of the world economy among which the
civilization problems of hunger, poverty, a gap between rich and poor countries have not been
solved. However, the “new economy” constructed on the principles of “rethinking globalization”
except criticism of the IMF, the WB, and WTO, is not offered by the authors.
The markets of financial assets and infrastructure institutes are the first reaction to the new
phenomena, so the analysis of deglobalization in international banking is extremely relevant. BIS, on
the basis of bank reports and statistics, recorded a certain reduction in assets of EU banks abroad as
a reaction to global crisis and ECB requirements due to keeping capital base. Banking systems in
Canada, Japan, and even the USA, on the contrary, strengthened the assets, deals, branches,
transactions (McCauley et al. 2017, 2019, pp. 120–121). Formulation of the question “de-dollarization
vs. globalization” through a prism of small economies is interesting and perspective (Iversen 2009,
The Chinese economy is of interest not only as a phenomenon of a country demonstrating rapid
growth, but also as a test ground for new financial instruments. For example, the international
Int. J. Financial Stud. 2020, 8, 7 14 of 17
comparative analysis of “green credits» has shown that the profitability of China’s banking sector is
positively affected by the amount of assets, management expense ratio, cash ratio, GDP growth rate,
and non-performing loan ratio. However, the asset size and capital adequacy ratio negatively affect
the international banking sector (Song et al. 2019). Other studies on the “green assets” of Chinese
banks in the Gulf Islamic stock markets (Medhioub and Chaffai 2019) have shown similar results.
The above research is limited to the circumstance that new phenomena and processes are in a
stage of formation, development. Not all of them will remain in the economy, which often shows a
swing, return, and renaissance of old forms, therefore, the debate on “globalization vs. de-
globalization” will be continued.
The research has shown that the future structure of the global economy will most certainly be
defined by the following factors.
1. Post-crisis recession and many problems of modern global economy result from the global crisis,
and are viewed as combinations, on the one hand, of failures of separate elements of a financial
system (markets of financial assets, IMF), and, on the other hand, of transition to technologies
4.0 and common problems of the world economy (ecology, pure water, famine).
2. The regulation of the world economy should be based on international law, agreements, and
institutions as the compromise between the countries defending the sovereignty and economic
3. The modern economy has faced new risks, the scale and depth of which are capable of causing
a global crisis. The analysis has shown that risks of decreasing rates, delays of economic
development of China, prompt growth of the state and corporate debts, loss of former sources
of economic growth are posing a threat to the sustainable development of the world economy.
New trends of deglobalization and dedollarization have deepened risks and initiated the
rollback mechanism from the achievements of globalization, leading to trade, tariff, sanctions
4. Global crisis and post-crisis recession have accelerated the processes of de-globalization and de-
dollarization and have raised the issue of changing the leader in the world economy. The
comparative analysis of the USA and Chinese economies, including other groups of countries
for the leadership potential (the size of the economy, quality of life, competitiveness, the stability
of currency) has shown the leader absence solo. Therefore, the countries of the 21st century
should no more seek the leadership of one country as a driver of the economy and capital market,
but rather focus on developing and using SDR (with a basket from 15–20 currencies of G20) as a
The research faced a number of restrictions. The perspective of the article and solvable tasks
were aimed to detect the patterns of global finance, crises, risks, anti-recessionary actions of the
monetary authorities, and finally, systematization of the directions of restructuring of the global
economy. The range of tasks of the research does not allow considering all factors, relationships of
cause and effect and correct correlation of the variables. The database was made from different
sources. The audit of their techniques is impossible. The reliability of data limits the correctness of
the comparative analysis. Restrictions of the research are also caused by the absence of a standard
glossary of terms and definitions needed for the academic science and business. The authors did their
research in accordance with moral, ethical, and legal restrictions as the global economy exists in a
close connection with geopolitics, ethno-cultural relations, and contradictions. Moreover, it was
difficult to consider the interdependence of national and international law.
The future directions of the research might concern such issues as the correlation between the
sustainable development of the world and national economies, MNC and domestic companies
(sustainable economic development is caused not only by balancing the sectors of economy and
pursuing effective economic policy, but also by the ability of the national economy, while maintaining
its position in the global economy, to resist external pressure and prevent the outflow of FDI,
Int. J. Financial Stud. 2020, 8, 7 15 of 17
collapses in the world forex and stock markets). Another possible direction of the research concerns
new sources of economic growth for the 21st century, as former sources of economic growth in
emerging markets and the middle class in the West seem to have exhausted its current potential. With
the technological revolution 4.0 the search for new sources of growth for the world economy becomes
quite expedient. In the context of the world economy, the issue of cryptocurrencies vs. reserve
currencies and classical money is of primary importance as well. Cryptocurrency necessitates the
revision of the classical theory of money, functions of the Central Bank, systemic banks, and
international payment systems. Digital money and assets are subject to thorough research in order to
ensure their effective legislative regulation. Finally, the questions raised in this paper might be
interesting for those who study the world system of funding. Even though the world economy system
of funding does not set requirements for sustainable development, there is a need to review the
theoretical and practical resource base of the IMF, Central Banks, reserve and investment funds of
Author Contributions: Conceptualization, writing and revising, V.M.S. and N.A.Z. All authors have read and
agreed to the published version of the manuscript.
Funding: This research received no external funding.
Conflicts of Interest: The authors declare no conflict of interest.
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