We knew it was coming but it still caught the eye when the news landed last month. Due to a statistical revision of 2004 GDP data China is now officially the world’s sixth-biggest economy.
Since China is the fastest-growing major economy and the closely controlled yuan currency was recently revalued, it is a virtual certainty that the country will leap-frog France and Britain into fourth place once the 2005 numbers are formally released this year.
On balance, the rise of China is surely good news for the human race because it suggests that the lives of a quarter or so of our kith and kin are catching up and improving economically.
But it also presents challenges – particularly for the global environment and for global security. Chinese culture is firmly rooted – it is one of the world’s great civilizations. The Chinese are natural-born problem solvers. So I’m hopeful. But the question remains: how will an economically powerful yet undemocratic China behave in the future?
We’ve already seen how berserk China can get over Taiwan and how immaturely it behaved over the SARS outbreak, but it has also behaved more responsibly in the case of bird flu and North Korea.
The dilemma is that a one-party polity hasn’t got the wherewithal to change internally unless there are political tensions, and those tensions aren’t likely to arise unless there is major social instability as millions of rural Chinese flock to the cities in search of work and the economy malfunctions.
Those tensions, in turn, are also more likely to lead to repression or foreign policy diversions rather than democratic reforms or a people’s revolution because the communist Chinese state isn’t on its last legs but has been reinvigorated by the economic reforms first unleashed by Deng Xiaoping, unlike the Soviet Union in the 1980s.
Yet, it’s probably in all our interests that the Chinese economy continues to expand.
Like India — currently the world’s tenth-biggest economy — China has plenty of catching up to do. Europe’s five biggest economies have a combined population that is barely one-fifth of China’s and yet their combined GDP is five times bigger than the Chinese economy’s. Compared with India, the population of Europe’s big 5 is more than four times smaller while the combined economic output is 14 times bigger.
But just as Spain was classified as a third world country barely 30 years ago and is now the world’s eighth biggest economy, catch up India and China surely will.
Since free flow of trade, capital and ideas is the common denominator, I don’t think the West need worry.
Worries about unfair, cut-throat Asian competition and lost jobs are surely offset by the long-term opportunities proffered by these new Asian super markets and by the fact that it has helped — together with the Internet — to keep a lid on global inflation and, by extension, global interest rates, thereby sustaining long-term growth everywhere.
(To paraphrase the Sage of Omaha — A rising tide of liquidity gives everyone a lift; It’s only when the tide goes out that you can find out who isn’t wearing any pants).
The old left might not like it and many might struggle to adapt but flexible labour markets, (re)training, perpetual innovation and shifts up the value chain in the West are necessary for the greater good of global economic development. There is nothing socialist in just looking after narrow syndicalist interests at the expense of the greater good, even if labour ought to be defended against the excesses of capitalism.
We can only hope that the example of Hong Kong, a growing middle class, and exposure to outside influences gradually loosens up China’s political apparatus. We can also only hope that technological innovation and a greater awareness help to address the environmental side-effects of China’s and India’s belated economic re-awaking.
This is a guest article by El Cid. He blogs on zones2and3
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Filed in: Current affairs,Economics,The World