If any country has benefited from globalization, it is China, which has an unfair advantage as an exporter and manufacturing center because the currency, the renminbi, is artificially undervalued.
China has, to be sure, been the biggest winner. Yet weak currency or not, the export-led growth model will ultimately be crushed by its own success. How can any one country, let alone all countries, increase exports by 15 percent to 20 percent a year when the world economy grows only at 3 percent to 4 percent a year? Complicating the equation is the strong likelihood of a plunge in the U.S. dollar, which will happen if our trade deficit continues to grow. China would end up with a lot of worthless factories that used to make products for the U.S. market. I tell people that China may be your least expensive place to manufacture a product, but you would be smart to put your factory on wheels.

China should embark on a strategy of internally generated growth. Between them, China and Hong Kong have some $500 billion in foreign exchange reserves, accumulating at almost 0 percent interest. They should be putting the money into long-term investments in infrastructure and agriculture, a move that would lower the growth rate but create jobs—and, to the benefit of the rest of the world, boost demand for imports.

The global economy has already weathered financial meltdowns, stock market crashes and a recession with no serious shocks or aftershocks, so it appears to be strong enough to withstand any crisis.
There are, nevertheless, some real risks to the global economy. One is deflation, such as we have seen in Japan. The second big risk is a falling U.S. dollar. The rest of the world has become dependent on the $450 billion worth of net demand that comes from the United States. Any sharp fall in the dollar would blow up the existing supply chains, because what were cheap places to manufacture components would become expensive.