China’s Rise is Inevitable China’s inevitable rise ranks among the most important world developments of the last 100 years. Since America is still trapped in its sixth year of economic hardship, and the Chinese economy is set to surpass the U.S.’s before the end of this decade, China looms very large on the horizon. A U.S. intelligence report stated that China's economy is likely to surpass the U.S. in less than two decades while Asia will overtake North America and Europe combined in global power by 2030. Modern China’s rise to world economic power, like its predecessor from 1100 to 1800, is based on its enormous productive capacity. China’s rush to economic development is beautifully depicted in the documentary, “Last Train Home.” Trade and investment was governed by a policy of strict noninterference in the internal relations of its trading partners. Unlike the U.S., China did not initiate brutal wars for oil; instead it signed lucrative contracts. Also, China does not fight wars in the interest of overseas Chinese, as the U.S. has done in the Middle East for Israel. China’s sustained growth in its manufacturing sector was a result of highly concentrated public investments, high profits, technological innovations, and a protected domestic market. While foreign capital profited, it was always within the framework of the Chinese state’s priorities and regulations. The regime’s dynamic export strategy led to huge trade surpluses, which eventually made China one of the world’s largest creditors, especially for U.S. debt. In order to maintain its dynamic industries, China has acquired huge inflows of raw materials, resulting in large scale overseas investments and trade agreements with agro-mineral export countries in Africa and Latin America. By 2010, China replaced the U.S. and Europe as the main trading partner in many countries in Asia, Africa, and Latin America. On March 4, 2011, China’s National People’s Congress approved a new national development program for the next five years from 2011 to 2015, otherwise known as the Twelfth Five-Year Plan. This far reaching plan sets the nation's course for the next five years. The social and economic measures contained in the plan will have a deep impact on the business landscape, both within China and in countries that do business with China. The plan is representative of China's efforts to rebalance its economy, shifting emphasis from investment towards consumption and development from urban and coastal areas toward rural and inland areas, initially by developing small cities and greenfield districts to absorb coastal migration. The plan also continues to advocate objectives set out in the Eleventh Five-Year Plan to enhance environmental protection, accelerate the process of opening and reform, and emphasize Hong Kong's role as a center of international finance. The targets for the Twelfth Five-Year Plan includes growing China’s GDP by around eight percent, increasing annual growth of per capita income by seven percent, increasing the minimum wage by thirteen percent each year, and spending two percent of GDP on research and development by 2015. Also, bringing the population below 1.39 billion by 2015, readjusting income distribution to put an end to the wide gap, firmly control the excessive rise of housing prices, implement prudent monetary policy, intensify anti-corruption efforts, accelerate economic restructuring, and dealing with the complex situations in development in 2011 are included in the plan. Also, three of the main priorities in this plan are sustainable growth, industrial upgrading and the promotion of domestic consumption. These priorities explain why certain sectors, including energy, automotive, IT infrastructure, and biotechnology also receive a high degree of focus. China’s industrial promotion plan allows it to concentrate on specific industry sectors, invest in them, build them up, and then work on the next, more lucrative, industry sector in order to grow their economy. To prove this point, China has built up its apparel manufacturing industry and is now moving on to more high value products and services. For example, today, China is implementing its Twelfth Five-Year Plan on developing the strategic emerging industry by moving away from basic apparel manufacturing into production of more high value products, including energy efficient vehicles and technology. China has been growing at about nine percent per year and its goods and services are rapidly rising in value and quality. In contrast, the U.S. and Europe have stayed around zero percent growth from 2007 to 2012. China’s innovative techno scientific establishment routinely copies the latest inventions from the West and Japan, and improves them, thereby decreasing the cost of production. Also, China has replaced the U.S. and European controlled international financial institutions, such as the IMF, World Bank, the Inter-American Development Bank, as the principle lender in Latin America. China continues to lead as the prime investor in African energy and mineral resources. Also, China has replaced the U.S. as the principle market for Saudi Arabian, Sudanese, and Iranian petroleum and will soon replace the U.S. as the principle market for Venezuela petroleum products. Today, China is the world’s largest manufacturer and exporter, dominating even the U.S. market, while playing the role of financial life line as it holds over $1.3 trillion in U.S. Treasury notes. Also, under growing pressure from its workers, farmers and peasants, China’s rulers have been developing the domestic market by increasing wages and social spending to rebalance the economy and avoid the threat of social instability. In contrast, U.S. wages, salaries, and vital public services have sharply declined in absolute and relative terms. Luxury goods are also booming in China. During the global recession in 2009, luxury goods saw a sixteen percent sales growth, a moderate slide from the twenty percent level of the previous few years, which is still far better than many major luxury markets. Sales in that year reached RMB 64 million, which is about $10 billion. Robust economic growth rekindled the market in 2010 and, according to research by McKinsey & Company, the market is on track to reach RMB 180 billion in 2015. By then, China will account for more than twenty percent of the global luxury market, overtaking Japan as the world's largest. There are three key reasons why luxury goods are doing extremely well in China. First, rapid increases in wealth, and shifting social mores that allow the display of that wealth, are driving a growing infatuation for luxury goods. Second, access to an explosion of information on the Internet, an increasing fondness for overseas travel, and first hand experience purchasing and consuming luxury goods, are contributing to a substantial rise in sophistication. Contrary to popular belief, a growing number of Chinese luxury consumers are exhibiting a noticeable trend away from overt displays of wealth, and towards more understated forms of luxury consumption. Third, rapid urbanization and growing wealth outside China's largest cities is driving the emergence of several new geographic markets with sizeable pools of luxury goods consumers. Over the next five years, the number of such cities is expected to double from 30 to 60. In all, there are five main distinguishing features of China’s rise. First, China has pursued capitalism even though it employs a communist political system; Chinese authorities have defended this combination as “seeking truth from facts.” Second, China pursued a policy of state sponsored capitalism with a reliance on state owned enterprises. Third, China invested heavily in physical infrastructure. Fourth, China became the factory of the world, relying mostly on foreign direct investment. After the U.S., China is the second largest FDI recipient in the world. Fifth, China’s exchange rate policy designed to promote competitiveness. Even though China’s economy is not quite perfect, it is clear that China’s economic development and economic strength are growing and that China’s rise is inevitable.
Resources:
http://www.nbcnews.com/business/economywatch/chinas-economy-will-be-no-1-less-20-years-us-1C7511557 http://www.chinalawblog.com/2013/03/chinas-12th-five-year-plan-go-with-it-not-against-it.html http://csi.mckinsey.com/knowledge_by_region/asia/china/chinaluxury2011 http://china.ahk.de/uploads/media/NEVIP_2012_Fair_Brochure.pdf http://english.peopledaily.com.cn/90780/7594593.html