Financialisation of developing and emerging economies and China’s experience: how China resists financialisation

In this paper, we discuss the process of financialisation of developing countries and emerging economies (DEEs) from the perspective of critical realism (CR). We argue that the emergence of financialisation depends on the inherent tendency of the imbalance between the accumulation of productive and financial capital being actualised, and emphasise how government’s intentional actions under current social structures relate to this process. We use China as a case study to illustrate how DEEs can resist financialisation and maintain productive accumulation during development. We elaborate on various institutional and policy adjustments undertaken by China during different phases that promoted productive accumulation and how China avoided financialisation for much of its growth period. Our discussion helps to explain why China’s limited financialisation compared to other DEEs who experienced financialisation featured by dependency. We conclude by highlighting new potential risks and sources of financialisation faced by the Chinese economy.