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  • Oct 25, 2014
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CommentInsight & Opinion

The inexorable tilt to China

Andrew Leung says despite a litany of ills, China's connectivity in global production and transport, as well as the sheer size of its workforce and ambition, will ensure its rise

PUBLISHED : Monday, 14 October, 2013, 12:00am
UPDATED : Monday, 14 October, 2013, 3:09am

As Russian President Vladimir Putin stole a march on the US over Syria and as President Barack Obama saw his much- vaunted participation at the Apec summit in Bali derailed by domestic squabbles, the unspoken question is whether this may signal a global tilt away from sole American leadership.

To be sure, US military strength remains supreme. But this is not as decisive as it appears in influencing which way the geopolitical wind blows. Short of an all-out war, leaders across the globe, while welcoming a US military umbrella, tend to be more concerned with economics and employment. The question that follows concerns the power dynamics at play and, in particular, China's role.

Some scholars have expressed doubts about the decline of America and the dawn of a new Asian age. Others point to China's growing economic might.

So who is right? By last year, China's per capita gross domestic product had reached around US$6,100, compared with Japan's US$46,000 and America's US$50,000. China has vowed to quadruple its GDP by 2020. If its economy continues to shine as it has, catching up with Japan, if not the US, in 30 years is not improbable.

However, China, along with the rest of Asia, is now growing at a much slower rate. Indeed, the nation is changing course towards a slower and hopefully more sustainable pace of growth. Moreover, huge obstacles remain. Professor David Shambaugh, a senior fellow at the Brookings Institution, doubts if China under authoritarianism can achieve breakthrough innovation. The spectre of collapse, like that of the former Soviet Union, serves to reinforce political inertia, entrenched by powerful vested interests, including the military and large state-owned enterprises. An assertive nationalism born of centuries of victimhood feeds into belligerence towards neighbours.

Nevertheless, notwithstanding the familiar litany of ills, including corruption and pollution, the reality remains that the productivity of one-fifth of mankind is now being unleashed, albeit starting from a relatively low base. The following facts are instructive.

First, China is churning out some seven million university graduates a year. By 2020, it will have 195 million graduates, more than the entire workforce of the US. Already, China has become the world's top filer of patents and trademarks. The Royal Society expects it to surpass the US in scientific citations this year.

Second, China is witnessing the fastest and largest urbanisation drive the world has ever seen - 221 new cities each with a population of over one million will be added by 2025, compared with only 35 such cities in Europe at present. This will serve to increase the number of China's massive consumers.

Third, in spite of rising wages, China remains the hub of a global supply and production chain, thanks to its massive economy of scale and excellent global transport links. Five of the world's top eight container ports are in China. A study by Arvind Subramanian and Martin Kessler of the Peterson Institute for International Economics highlights the epochal shifts in globalisation and economic power in the 21st century, in which a rising China plays an increasingly powerful role as a "mega trader", reinforced by a multiplicity of regional free trade areas and agreements.

Fourth, China is quietly developing global transport infrastructure of epic proportions, linking vast continents and distant shores to the Middle Kingdom. A monumental railway project is being planned linking the port of Shenzhen to Kunming in western China and onwards to Myanmar, Bangladesh, India, Pakistan and Iran, and then across Turkey to Rotterdam in the Netherlands. Known as the "third Eurasian land bridge", the proposed high-speed-rail network will span 15,000 kilometres, a much shorter and less geopolitically vulnerable journey than that by sea via the Indian Ocean through the Strait of Malacca. A branch line would begin in Turkey, crossing Syria and Palestine, and end in Egypt, providing a rail link from China into Africa.

In addition, a project with a 50-year concession has recently been approved by Nicaragua's Congress to build a 286-kilometre canal connecting the Caribbean with the Pacific via Lake Nicaragua, at a cost of US$40 billion. The canal would serve the largest container vessels, which can be accommodated at Lianyungang port, near Shanghai.

Notably, Lianyungang is planned to be the starting point of a "second Eurasian land bridge", to run across China to Kazakhstan and, via Russia, Belarus and Poland, to the markets of the European Union.

Finally, while debt-laden America continues to reach for the money-printing machine, faith in the greenback is quietly seeping away. Meanwhile, the renminbi speeds up its trajectory to becoming a leading reserve currency. The days of dollar dominance appear numbered.

Naturally, with an ageing population profile, China is likely to grow old before getting rich in per capita terms. Assuming it can overcome the so-called "middle income trap" (by no means a foregone conclusion), its per capita GDP may well not reach beyond that of a moderately well-off country like Turkey even by 2050. But, even so, the economy would be larger than that of the US by a wide margin.

In measuring a country's overall strength, per capita income alone can be a misleading yardstick. Few know that Macau ranks among the top five in the world in terms of per capita income (due to its mega-casino economy). That doesn't make Macau a world power. But when China's economy, with its overwhelming global connectivity, grows to be the world's largest, the whole world would be well advised to sit up.

Andrew K. P. Leung is an international and independent China specialist based in Hong Kong


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Most investment in China goes into state owned companies who basically can't innovate anything. Do you notice China's private sector doing much these days other than treading water and speculating in real estate? It could be that China's days in the future will be glorious, but it certainly can't be extrapolated from what we see at present. China 2013 seems much more similar to Brazil in the 1970s, than Korea in the 1970s. (i.e. The middle income trap is coming unless truly meaningful economic reforms are forthcoming, which doesn't seem politically possible.)
As the global public opinion survey reported in today's SCMP tends to show, the big problem for China is its political system and its weak commitment to human rights. After the horrendous experiences with such regimes in the 20th century few people with critical foresight want to to see the rise of another hardline regime. The world could actually use a liberalizing democratic China. As Shambaugh's arguments suggest, the Chinese people could also use such a reformist direction. With such reform China's rise would mostly be benign. We probably would not hear any more about it than we do about India's rise. Until that happens China will surely run into heavy headwinds.


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