In fact, the participation of newly industrialized nations in the global market has fueled a rapid economic growth worldwide for a long time. Their participation, however, did not cause a drastic rise in the prices of energy and raw materials across the world in the 1990s. The reason for that is that the US and the European countries had a booming stock market during that period, which absorbed a large quantity of fund. With the bursting of the stock market bubble in the US in the early 21st century, the US government began to lower down the interest rate by a large margin and injected a lot of fluidity into the market to rescue the endangered stock market. Subsequently, the futures prices of energy and raw materials began to skyrocket. The situation further deteriorated as the bubble in the US property market began to burst in the summer of last year. The Federal Reserve began to inject a large sum of fund into the market once again in an attempt to rescue US financial organs from bankruptcy. As a result of this measure, the futures prices of bulk commodities in the world market started to skyrocket out of control.

It is the US monetary policy that has caused this round of price crisis of global bulk commodities, and its continuing deterioration will make globalization difficult to carry forward.

Globalization started from developed countries and has been a product of global economic liberalization in which developing countries were persuaded to participate. Due to mounting doubts from the original advocates of globalization, the process is now at the risk of abortion once again. However, historical facts tell us that any kind of exit from the process or resorting to trade protectionism is not a good solution to trade disputes.

Any adjustment of domestic policies only by developing countries is not enough to maintain a steady economy in the world and prevent globalization from creating new global crises. To better deal with these challenges, developed countries should also make corresponding policy changes.

The author is a researcher with the Development Research Center of the State Council

(China Daily August 5, 2008)