PUBLISHED : Wednesday, 30 September, 2009, 12:00am
UPDATED : Wednesday, 30 September, 2009, 12:00am

Life is good for Zhong Guoren . The 42-year-old founder of Green Dragon has seen his solar energy company grow into the world's top in its field since the central government instituted a phased carbon tax on all fossil fuels nine years ago.

An initial public offering four years later raked in a solid seven billion yuan - the de facto world currency - and Green Dragon has maintained darling status on the Shanghai stock exchange, the world's largest.

Zhong's success came after a gradual but massive switch to alternative energies worldwide after global oil production peaked 30 years ago and oil prices reached disastrous levels.

He often remembers his father telling him of how some countries went to war for the doomed resource.

Zhong says goodbye to his two children, who are driven to Confucius Renaissance Middle School by robotic helper Abian , which he recently shipped over from Taiwan, a federal state of China.

He then takes his morning run around Tiananmen Park, the biggest green area in central Beijing that once witnessed massive political gatherings and troop processions.

Zhong has a busy day planned. He has to pop over to meet UN Development Programme officials in its recently relocated headquarters in Beijing to talk about a charity project aimed at beaming electricity to the remote town of Kimpese in Congo.

Kimpese is in one of the few non-urbanised areas in Africa - a continent whose economic and social landscape has been transformed by Chinese capital and a massive wave of Chinese immigrants, who have become the dominant ethnic group in every corner of the continent.

After the meeting, Zhong has to rush down to Qingdao , now the world's third-biggest port, to preside over a joint venture with a San Jose-based solar company that used to be the market leader.

Zhong plans to be back in Beijing by 7pm to watch the live broadcast of the launch of the 'Ziqiang VII' space shuttle's manned mission to Mars. The newly elected government, the right-wing Youth Force of China that splintered from the Communist Party 12 years ago on a slogan 'for people who give a damn', decided this was the perfect way to mark the centenary of the People's Republic of China today - October 1, 2049.

An economy twice as big as that of the US

Gazing into the crystal ball at China's future offers any number of visions. Factors - ranging from political stability and economic sustainability to climate change and war - are weighed in judgments of where the country could stand in 2049 and beyond.

There is consensus on one important point - that the economic performance of the past three decades is no flash in the pan. Forty years from now, with an output double that of the United States, China will have climbed to the top of the economic podium.

According to Mao Yushi , one of the mainland's most influential economists, the economy by then will not only be bigger - it will also be healthier.

The services industry will increase its share of gross domestic product to 80 per cent, from the current 41 per cent, reflecting a new consumer orientation. The grotesque trade imbalances, which have mainly been driven by the country's excessive dependence on exports, will ease off, Mao predicts.

Among the world's top 500 firms, Chinese companies will account for 300 to 400, most likely in telecommunications, vehicle production, banking, petrochemicals and electronics. With present barriers to free competition having been eliminated by then, the telecoms sector will become the most dynamic element in the national economy. Also, China's pharmaceutical companies and research institutes will be reaching for the global lead in biotechnology, particle physics, genetic engineering and other hi-tech fields.

An economy topping the global chart would almost certainly give China commercial and institutional leadership in the world, says Albert Keidel, former senior associate in the China programme at the Washington-based Carnegie Endowment for International Peace.

Fluctuations in its domestic demand will send ripples around the world, he predicts. Market surveys will focus on China first. Its monetary policies will affect liquidity and interest rates everywhere. Its commodities and securities markets will be the world's largest, and will heavily influence global standards for due diligence. Leadership of international institutions such as the United Nations, International Monetary Fund and World Bank will gravitate towards China.

The United States will have an important secondary influence, but it will need to compromise and its sphere for unilateral action will be increasingly curtailed, Keidel says.

If the development path continues, it will be among the world's top 30 modernised nations 40 years from now, Mao says. In 2049, the standard of living will be higher than for Americans today - although still behind two-thirds of Americans at that time. Average personal income will hit US$25,000 to US$30,000 a year, lifting wages about 50-fold in rural areas and virtually eradicating poverty.

Demographic dividend turning into demographic tax

By then around 80 per cent of the population will live in cities, compared with 44 per cent now, according to forecasts by McKinsey Global Institute. Once a population's urban share becomes predominant and most families enjoy higher urban-style living standards, overall inequality declines. The country's Gini coefficient, which has been rising steadily from below 0.3 four decades ago to 0.46 today, should drop back to the range of 0.3 to 0.4, Mao says.

But at the same time, China will reach a stage where its demographic dividend, which has been the principal driver of its growth, turns into a demographic tax. The population is projected to be outstripped by India in 20 years, will see its working population shrink considerably and the ratio of the elderly (those aged above 65) rise from 8 per cent of the population to an expected 25 per cent in mid-century, according to a UN forecast.

The ageing population means increased health, pension and labour costs, all of which will erode the mainland's competitive advantage, says Dr Minxin Pei, political scientist at Claremont McKenna College.

More importantly, Pei says, this will also cause the savings rate to fall. This means the government will be unable to continue subsidising industrial growth with private wealth. In a global context, declining savings rates and labour supply relative to competitors will have a negative impact on capital flows and foreign direct investment. Thus, with fewer people entering the workforce and an ageing population, China faces the curse of an old clich? - getting old before getting rich.

'A very new kind of number one'

So, will China be able to sustain its status as number one? And will it gain the technological, military and cultural leadership that comes with superpower status?

Andrew Nathan, a political scientist at Columbia University, believes China will almost certainly become the world's largest economy, but this would not confer as much power as it did in the past.

'Historically speaking, China will be a very new kind of number one,' he said. Unlike other number ones in history, China is not likely to be the world's leader in science and technology, despite forecasts by the Chinese Academy of Sciences on a Chinese base on the moon or even Mars by mid-century. Unless the other hi-tech nations stop competing, China will not surge ahead of them in a wide range of fields to become world leader like 19th century England or the 20th century United States, Nathan says.

Nor will it dominate militarily. It will not be able to gain energy or commodity security through conquest the way the colonial powers did or through the indirect neo-colonial control of the US. Barring the collapse of other strong powers, there will be no power vacuum to expand into, nor will China have the kind of military lead to force its way to supremacy, Nathan says. China will have to get hold of the resources that it needs through economic means.

Then, will a hegemonic China exercise its power in any manner familiar from the American experience? Stanley Rosen, director of the East Asian Studies Centre at University of Southern California, says no.

In contrast to the self-image of the United States as a special, chosen nation created to play a unique role in history as a messenger of universal values such as liberalism, democracy and human rights, the 'Chinese model' begins with a fear of chaos and disorder brought about by a weak central government. Thus the goal in China is domestic stability, not the projection of its ideology to other nations.

'If the American 'national interest' implies not just economic prosperity and civil liberties at home, but a world where others also enjoy a variety of political freedoms, the Chinese national interest is far more limited and domestically defined,' Rosen says.

China in 2049 is likely to reside in a multipolar world in which its influence is exercised more subtly, without the military adventures that have marked the American model, Rosen says.

Still, top-dog status would confer special influence on China as it has on other economic leaders in history, Columbia University's Nathan says.

Less tangibly, we should expect to see a 'Sinicisation' of global culture through the influence of Chinese consumers' tastes, Nathan predicts. Clothing styles, food flavours, the design and packaging of global brands, music, sports and entertainment would respond to the draw of the Chinese market. More and more, we should expect to see our youngsters studying Chinese and Chinese become the most popular choice of foreign language across the continents.

Stumbling blocks to pre-eminence

Nevertheless, there remain significant hurdles for China to overcome in its march to pre-eminence.

The major stumbling blocks will be social instability, corruption and environmental challenges, says Orville Schell, a veteran China watcher.

Some argue that an affluent society would minimise social and ethnic tensions, but Schell says tensions in Xinjiang and Tibet give little cause for optimism, even though these two regions are far more irrevocably integrated into China as parts of a multi-ethnic nation than Taiwan.

On the environment, David Sandalow, the US assistant secretary of state for energy, projects a 2.7 degree Celsius temperature rise by 2050 as the result of unchanged emissions in China and an 80 per cent cut elsewhere. However, if China promotes low-carbon output, according to the country's top climate change policymakers, its carbon emissions could peak around 2030 and by mid-century use of fossil fuels could drop to 70 per cent from the current 90 per cent. China's carbon emissions 'could fall to the same levels as in 2005 or even lower'.

Schell, director of the Centre on US-China Relations at the Asia Society, says people should be encouraged by the speed with which Beijing had started to become aware.

'When Chinese leaders finally do dedicate themselves to solving problems, they have proven able to accomplish amazing things,' he says.

The speed of the awareness is a reflection of the urgency required. By mid-century, China will have to have completed a transition away from being an oil-based economy, thanks to decreasing production and increasing energy demand. The South China Sea, a disputed area now for its oil and gas resources, might not be as disputed when we enter the 'post-oil era'.

The real question

Arguably the biggest question mark of China's future is over politics. Can the leadership continue to be dominated by the same fairly small group and their offspring? Or will ordinary people - aided by technological advances and increasingly aware of their rights and willing to protest - start to have more of a say?

Perry Link, a renowned Sinologist at University of California at Riverside, says China's political fate depends on how these two big forces play out.

'My guess is that 40 years from now the Communist Party will no longer own a monopoly of political power and that its 'royal families' will have less control of politics and the economy than they now have,' Link says.

Can the Communist Party become one party among many? Is it willing to allow such competition? Will the party fashion itself, say after Japan's Liberal Democratic Party, whose party presidency rotates frequently enough among the heads of its several main factions to balance the entrenched interests of each? Do the Chinese people really want a messy, multiparty democracy? 'We have had no model for a country as large and important as China making a successful passage from being a Marxist-Leninist one-party state to ... to what? That is the real question,' Schell says.

Rosen predicts 'a hybrid form' in which democratisation in a Western sense does not occur, but public opinion plays an increasingly prominent role. The exercise of central power will become more selective, opening up new avenues for local initiatives in policy innovation and implementation.

Much of the change will be fuelled by a combination of new technologies, the rising expectations of an increasingly confident middle class, and the rapid change in younger generations, marked by an increasing boldness and lack of respect for any established authority. Today's 'angry youth', some of whom would still be angry at middle age, will push future governments to aggressively pursue China's interests. The middle class, who quietly endorse the leadership in Beijing today, may change its political attitude and play an important role in the struggle for democracy.

Will a future leadership struggle produce a contender who will 'play to the masses'? 'It is certainly possible to conceive of a charismatic strongman arising over the next 40 years if the promised wealth and power become unfilled promises,' Rosen says.

If the current elite manages to stay on top for another 40 years, Link says, his fear is that they will do it by stimulating and exploiting nationalism.

'Emotional ethnic pride may be the only force in the Chinese national psyche that is potentially strong enough to cause people to set aside the other worries that have recently been fuelling their protests: corruption, official arrogance, pollution, the gap between rich and poor, and so on,' Link says. 'It is possible, probably a 20 per cent chance ... that 40 years from now the [Communist Party] will run a successful monster state based on ethnic chauvinism. This, if it happens, would be bad news for the world.'

While China has begun to amass real economic, military and geopolitical clout, there are doubts over the level of international acceptance it can achieve over the next 40 years under the present system. 'Great power' status will not come until it has matched its political and economic might with moral power, Schell says.

Such 'moral-suasion' is a quality much esteemed in the Confucian scheme of things, but it is at odds with many aspects of contemporary Chinese governance. Link says full cultural and moral respect will not come until there is a fundamental political change.

'The truth is that the Communist Party itself provides all the main reasons for China's continuing loss of face in world opinion,' he says. 'The international image of China would rise dramatically if it were able to get out from under its current rulers and their system.'

According to Columbia's Nathan, this type of transition is unlikely to come easily - or quietly.

The regime is willing to change in any way that helps it stay in power, but is unwilling to relax the ban on autonomous political forces, Nathan says.

'This makes it more likely that regime change, should it come, would occur through some kind of rupture, when the elements of potential crisis come together.'

The most likely form of transition for China, therefore, remains the model of Tiananmen, with three elements coming together.

The first element is a robust plurality of disaffected citizens. The 1989 protests broke out because of inflation and corruption; Nathan identifies potential future triggers as unemployment, an environmental disaster or some form of national humiliation.

Second comes a catalytic event that sends a signal to scattered social forces that the time has come to rise up.

The third element is a split in the leadership, whether due to personality differences, power struggle, uncertain support of the armed police and military, or ideological division, that renders the response from the top uncertain or weak and allows the challenge to snowball, Nathan says.

One factor that is important to remember is how often developments in China have surprised even the best-informed scholars. One prediction seems safe - that China will surprise the rest of the world again by 2049.

'In China, one must always be ready for the unpredictable,' Schell says.