After a quarter of a century's relentless growth, China is putting increasing emphasis on balanced development as a bulwark of stability. At the last National People's Congress, Premier Wen Jiabao significantly highlighted 'Five Balances': rural v urban, human v. environmental, economic v. social, national v. local, and inward v. outward investments. He also stressed 'government for the people' and the need for 'People Focus' rather than 'Growth Focus'
These aims are liable to be dismissed as Communist slogans. But a more careful examination of China's daunting challenges foreshadowed in the 11th Five Year Plan 2006-10) suggests that they are more akin to survival strategies necessary to maintain national cohesion and stability without which blind growth would be of little avail.
Apart from human considerations, recent dramatic rises in oil and metal prices have flagged up the natural constraints to sustained breakneck economic growth of a population the size of a fifth of mankind. Multiplying such growth on the basis of current US levels of consumption is clearly not an option. Indeed, China's rapid economic development has already brought it into increasing international conflicts with some competing countries and necessitated strategic alliances with others.
Aside from mutual nationalistic sentiments and influence in the UN, the current row with Japan owes in no small measure to disputes of territorial sovereignty over oil and gas exploration rights in certain parts of the East China Sea.
China's heavily import-dependent energy requirements are also driving it to cement ties with selected countries near and far, such as Kazakhstan, Iraq, Iran, Venezuela, and the Sudan. The same with minerals especially base metals. An Energy Office led by Premier Wen or a Vice Premier under the State Council is likely to be set up later this year.
China's globalized growth is also shifting other international alliances. The ASEAN countries are finding themselves gaining from export of commodities to China. Notwithstanding its recent row with China, Japan realizes only too well that the revival of its sagging economy depends on outsourced manufacturing in China and exports to China of high-end components and parts. Similarly, aside from outsourced manufacturing, South Korea has become the second largest exporter to China. On the other hand , a number of labour-intensive LDCs such as Mexico, Egypt, Bangladesh and Sri Lanka, are feeling the pinch of China's surging apparel exports to their shared advanced markets as the relevant quotas have disappeared.
Protectionist pressures against China's export surges are also mounting in the advanced markets as jobs or whole industries are said to be threatened. China's global interface is bringing no greater conflict with a world power than that with the US. The RMB is at once relied upon through China's purchase of US bonds to finance a large proportion of the US current account deficit and blamed, together with China's surging exports, for this very deficit.
On a geopolitical front, the US is perceived to reinforce its regional influence by allying more closely with forces inimical to China's national interests, such as with Japan over Taiwan. China bashing has become a fashionable hobby on Capitol Hill, especially in the wake of President Bush's recent re-affirmation of US's self-appointed mission to spread freedom and democracy around the world.
Following recent democratic developments in certain states in the former USSR and the Near East, the prospects cannot be dismissed of renewed interest in the pace of China's own democratic development, sooner rather than later.
Yet the lure of the China market continues to fascinate the world. In PPP terms, China has already become the world's second largest economy. It has just overtaken Japan as the world's third biggest exporter. According to the Wall Street Journal, China's consumer society has surpassed the United States in refrigerators, TV Sets (50% more), mobile phones (60% more), meat (mainly pork), fertilisers (double) and steel (double).
Chinese demand for automobiles and oil are of course well behind those of the US (less than a tenth and a third respectively). But the rates of growth, if not year after year, are expected to remain robust as China's economy continues to grow. Following China's WTO entry and increasing global interface, its economy is bound to converge more and more with international norms. For a fairly long time, however, compared with more advanced economies, it is likely to remain subject to a great deal of State influence as well as geopolitical, social-economic and internal political considerations.
Understanding the kaleidoscope of these ever-shifting considerations and their underpinning longer-term fundamentals will be crucial to an increasing proportion of business ideas and decisions. For example, major developments have surfaced in China's geopolitical landscape over Japan and Taiwan in recent weeks. You may wish to read my latest articles on these aspects under Publications in my website detailed below.
Some of my coming Newsletters would focus on China's emerging automobile industry and the major trendsdriving this biggest and most dynamic, diverse, complex and exciting of emerging markets in the 21st century.
Andrew K P Leung, SBS, FRSA