– China, Growing Superpower

The rise and rise of China
Mail & Guardian on-line

China's explosive rise to economic superpower status was confirmed on Friday by the West's leading think tank in a new report predicting that it will leapfrog the United States and Germany within five years to become the world's biggest exporter.

Despite growing social strains and international concerns, the Organization for Economic Cooperation and Development (OECD) said there will be no let-up in China's breakneck growth.

China is not a member of the OECD -- a group of the world's richest developed nations -- but the Paris-based organization published its first report on Friday on a country that has been transformed within a quarter of a century from a struggling peasant economy to an industrial titan.

It already accounts for 6% of world exports and its potential to supply the globe with low-cost manufactured goods has caused tensions in the global trading system, exemplified by the recent "bra wars" row. The OECD said China's share is on course to rise to 10% by 2010, by which time it will overtake the US.

Despite 25 years of gross domestic product (GDP) growth at an annual rate of more than 9%, China is not expected to slow in the near future. The think tank predicted that the world's most populous nation will overtake Britain, France and Italy to become the fourth-largest economy within five years.

Hardly a day goes by without new evidence of China's surge up the ranks of the richest economies. This week, Ernst & Young released a report predicting it will surpass the US as the world's second-largest consumer of luxury goods within 10 years.

The accounting firm forecast 10% to 20% annual growth rates in the sector until 2015, by which time sales are expected to exceed $11,5-billion, or 29% of the world's total, second only to Japan.

A separate study by the China Academy of Social Sciences predicted that the middle class will more than double in size by 2020 to account for about 40% of the 1,3-billion population.

If such statistics are not convincing enough, one needs only look at the cityscapes of powerhouses such as Beijing, Shanghai and Chongqing, where the transformation is apparent in the forest of skyscrapers, shopping malls and roads.

But the OECD also identified areas that will have to be reformed if Beijing is to complete the transition from a centrally planned economy. These include strengthening the financial system, further steps to allow the currency to float freely and measures to reduce inequality.

Chiming with last week's report from the United Nations, the OECD said there is evidence of a growing gulf between urban and rural China and between rich and poor on the eastern seaboard.

"Although economic dynamism has helped reduce the number living in absolute poverty, income levels are still low and inequality is on the rise, not only between the cities and rural regions, but also within the more prosperous coastal provinces," the OECD said.

The think tank added that to reduce the gap in incomes, the government should make it easier for people to move from the country to the cities, but urbanization should also be carefully managed, partly through a reform of the land law.

The strains of China's spectacular growth are increasingly apparent. Energy shortages cause frequent brown-outs on the industrialized eastern seaboard during the peak demand periods of midsummer and midwinter. To ease demand, the factories of Shenzhen have to halt production one day a week and the lights on Shanghai's Bund, the old financial district, are cut on many nights.

Some of the biggest problems have been in the area of the environment and health. According to the UN and the OECD, China's ability to meet the Millennium Development Goal of cutting infant mortality by two-thirds is being hampered by unequal access to health care, and this point was also emphasized by the OECD.

But the state is no longer the main force for change. The OECD noted that, as a result of "profound shifts in government policies, the private sector is now driving China's remarkable economic growth". More than half of China's GDP is produced by privately controlled enterprises, it added. -- Guardian Unlimited © Guardian Newspapers Limited 2005