Wednesday 25 July 2007

The Asian Century

If you believe that this will be the Asian century, then another strong indicator has emerged to bolster your case. It relates to the size of China's economy. In 2005 China passed the UK to take 4th place in the league of the top economies in the world. The other day, the figures for China confirm she is now sailing past Germany and into 3rd place. Perhaps the most stunning fact is not that China is now 3rd, but that it is still rising so rapidly. Could China soon be a superpower rival to the US?

In "The Rise and Fall of the Great Powers", Paul Kennedy shows how economic data gave very strong signals about which nations were rising and which were falling back between 1500 and 1980. To take an example, Kennedy shows that while it's true that in the year 1900, Britain stood as the World's greatest power, the writing was already on the wall. The graphs for ship building, military expenditure, tonnes of coal produced, GDP, and so on, clearly show that Britain was being overtaken by Germany and the US. (As an aside, it seems that the Civil War in the US in the 1860s somehow unleashed its vast economic potential. From then on, it is possible to see it one day dominating the World. In fact, Alexis de Tocqueville predicted its potential as early as 1830)

Today, if we look at China's economic stats, we see a power rising at a stunning rate. Exports to US and Russia growing in double digits. Fixed asset investment up 29%. GDP growth 11.95. And if we believe that ultimately, geopolitical power is built on economic power, then we have every reason to believe that China will soon become one of the two or three biggest players on the global stage. The consequences of that would be a huge restructuring of global power.

The balance in the Pacific, where Japan plus US have dominated since WWII, would be turned on its head. What would it mean for other big nations that China borders, such as Russia and India? What would it mean for the global scene generally, where we have already seen less than benign influence by China in places like Darfur?

But none of this is a foregone conclusion. That China will continue its growth is not at all clear. Some commentators feel its growth has peaked and will cool off. (But we heard that before and it proved wrong). Furthermore, there are big questions about the reliability of Chinese figures.

Three major questions stand out, however, even if the figures have been tweaked. First, China's growth to roughly 3rd place in GDP terms is spectacular. And yet its per capita wealth is tiny (about 100th in world terms). What does this say about its potential? It reminds me of the vast untapped potential that Tocqueville saw in America 180 years ago.

And second, what is this transformation going to do to its political stability? How can its pseudo-capitalism sit within an authoritarian state?

And finally, what will this extraordinary transformation mean for the global environment?

* Thanks to wikipedia for the graph

No comments: