China wakes up and alarms the world

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August 2004Le Monde diplomatique 

People used to talk about "the day when China wakes" as if that nation were a brooding menace threatening the planet. The day has come and it is time to ask what effect China’s impressive awakening is likely to have on the world market. This demographic colossus with its population of 1.3 billion only embarked on economic reform after the death of Mao Zedong in 1976, and especially after 1978, when Deng Xiaoping came to power.

China’s model of development is built on abundant supplies of poorly paid labour, the creation of many assembly plants, the export of cheap production goods and inflows of foreign investment. As such it has long been seen as a fairly primitive economy, a country that is basic ally backward and in the iron grip of a mon opol istic ruling party. Even the much-needed measures China took to deal with its population growth were authoritarian.

However, China, though still a communist country, has ceased to be frightening to outsiders; in the euphoria of globalisation, hundreds of companies that relocated their production to China (having sacked millions of workers elsewhere in the world) saw it as a goldmine for the shrewd investor.The network of special economic zones along its sea coast has quickly turned China into a phenomenal exporter, and it now leads the world in exports of textiles and clothing, shoes, electronic products and games. Its products are invading the rest of the world, especially the United States. A huge trade imbalance has been created with the US: in 2003 the US trade deficit with Beijing was $130bn (1).

Such an export whirlwind has generated spectacular growth figures, and for the past two decades they have exceeded 9% a year (2). This democratic market communism has led to a real increase in incomes and in the quality of life for millions of Chinese households (3). It has also created a distinctively Chinese capitalism. At similar speed, the state has begun a fast-track modernisation of the country with an intensive construction programme of ports, airports, motorways, railways, bridges, dams, skyscrapers, stadiums for the 2008 Beijing Olympics and buildings for the 2010 Shanghai World Expo.

This construction frenzy, together with the consumer fever that has seized the Chinese, has added an extra dimension to its economy: in a very short time the China that previously frightened the world as an invasive exporting power has become an importer with a worryingly voracious appetite. Last year it was the world’s number one importer of cement (55% of world production), coal (40%), steel (25%), nickel (25%) and aluminium (14%). And it was the second biggest importer of oil after the US. These imports have led to an explosion of prices in world commodity markets, especially in oil prices.

China was admitted to the World Trade Organ isation in 2001 and is now the world’s sixth largest economy (4). It is leading world growth, and every surge in China has an immediate impact on the global economy. This is just the start. As China’s prime minister, Wen Jiabao, has said, despite the speed of growth, China is still a developing country, and it will take another 50 years of growth at the present rate for it to become an average developed country (5).

However, if China continues at this rate, by 2041 it will overtake the US and become the world’s number one economic power (6). This would have major geopolitical consequences. It would also mean that by 2030 its total energy consumption will equal that of the US and Japan today. And since it doesn’t have the oil to satisfy such energy demands, between now and 2020 it will be forced to double its nuclear capacity, building two nuclear power stations a year for the next 16 years.

Even though it ratified the Kyoto treaty in 2002, China is already the second biggest polluter on the planet and seems likely to become the first, releasing vast amounts of greenhouse gases that will dramatically worsen climate change.

In this sense China is a test case that may provide answers for the problems to be faced tomorrow or the day after in India, Brazil, Russia and South Africa: how to rescue billions from the misery of underdevelopment without making them join a production-oriented western con sumerist model that will have disastrous consequences for the planet and humanity.

1) See "Quand la Chine éternuera", Cyclope. Les Marchés mondiaux 2004, ed Philippe Chalmin, Economica, Paris, 2004.

2) 9.7% in the first quarter of 2004.

3) In 2003 per capita GDP was $4,690.

4) It stands between the UK and Italy (after the US, Japan, Germany and France) and is set to join the G8, the group of major industrialised countries which, besides these six, includes Canada and Russia.

5) El País, Madrid, 6 June 2004.

6) According to expert Maryam Khelili, by then the world’s most prosperous countries will be China, the US, India, Japan, Brazil and Russia

 

Translated by Ed Emery

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