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CHINA
from issue no. 11 - 2004

The Celestial Empire locomotive of economic development in the Far East

Towards the Chinese century


The paradoxes of history: the progress of the new economy created in the US has ended by facilitating China in enormous fashion. An economic giant that has been growing for years at a dizzying pace and that could become the major importer and exporter in the world. Shifting the political balance of the world


by Giuseppe Guarino


A night shot of  Nanjing Road in Shanghai

A night shot of Nanjing Road in Shanghai

Giulio Andreotti, as prime minister, made a long visit to China toward the end of the ’eighties. I asked to be included – but it wasn’t possible – in the delegation. He likely remembers that before he left for Beijing I said something more or less like this to him: «You who have so much authority, tell the Chinese not to abandon communism too quickly. If they get going, there’s a danger they’ll crush the rest of the world». The reason is simple. The Chinese population has reached one billion 300 million, it has its own language and a civilization that up to the seventeenth century was the more advanced, both in per capita wealth and technologically than any other area in the world, including Europe. Given the enormous space it has available it has never had to invade another country. It has an emigration that has flourished in many parts of the planet: along all the southern coasts of Asia and on the eastern coast of Africa, and also in the United States and, for some time now, in Europe.
In one of the last books of the Indian Nobel Prize-winning economist Amartya Sen, there is an illuminating comparison between India and China. He points out that Maoism – while causing infinite damage in China, like all communist regimes based on an ideology of the ideal of equality - created an efficient generalized health service and above all a public schooling service from the elementary up to university. Free education for all began around the ’eighties; in 2000 young Chinese graduates began emerging in great numbers. And some people are now surprised that China provides so many engineers…
Russian president Vladimir Putin with Chinese president Hu Jintao in Beijing14 Octobrt 2004

Russian president Vladimir Putin with Chinese president Hu Jintao in Beijing14 Octobrt 2004

If China had remained a closed country the graduates wouldn’t have known what to do. Along with the economic results of unemployment, ideological tensions would have arisen. But two unexpected events occurred. The collapse of the USSR showed the Chinese the unfortunate consequences of an abrupt abandonment of communism, ensuring that they at least went ahead with great prudence and shrewdness. The Chinese are shrewd politicians.
The second fact consisted of the “opening to the market” of a coastal area of about 250 million inhabitants. A point of departure. But the effects of the American new economy made themselves felt. Such is history: an economic movement created elsewhere, in the US, has ended by facilitating China in enormous fashion. The great boast of the United States, information technology, was going ahead rapidly. American industry realized that it could produce electronic components much more cheaply in China. Importing by air would be advantageous in its turn. So an integrated circuit with China was created that has given great stimulus to the economy.
China, starting out from a very low level, has achieved a rate of increase in its GNP of around 9% and that has been going on now for around twenty years. One needs to grasp the scale of a phenomenon that has a series of consequences for the foreign countries, attenuated in part by the fact that China possesses considerable natural resources. Let me explain. In almost all the listings of raw materials and natural resources China comes in the top few. While pro capita consumption was low, China was able to satisfy demand from its own internal production. The situation was in balance. China’s world trade quota was very modest both in imports and in exports. When the giant began moving the process created external effects both favorable and problematic. Let me describe them.
We are accustomed to consider the consequences of Chinese development by looking at Europe and the United States. But the integration being brought about between Beijing and the countries of east Asia is much more important. Today China has become the great stimulator of economic development throughout the Far East
Development forces China to import much more than in the past. The countries that have positions of consequence as exporters to China are chiefly those of the East. We are accustomed to consider the consequences of Chinese development by looking at Europe and the United States. But the integration being brought about between Beijing and the countries of east Asia is much more important. Today China has become the great stimulator of economic development throughout the Far East. The countries that occupy first place as exporters to China are Australia, Taiwan, Japan, South Korea, then come Great Britain and Germany but, before the United States, there is still Thailand and others. The “Chinese phenomenon” is being extended to the whole of east Asia. The involvement of the countries of east Asia should be kept well in mind when calculating what will happen tomorrow.
The second element to consider is that the development of China is causing intense consumption of raw materials and a correlative greater demand. It’s enough to compare what China produces with how much it consumes to see what materials will soar in price in coming years. The increase in the price of oil has not been determined only by the OPEC or the war in Iraq, but also and perhaps mainly by China. Then consider copper: China produces 589 million tons of it, is the sixth producer in the world, but consumes three times that quantity. In aluminium production China is third in the world after the United States and Russia, but consumes a third more. China consumes almost double the rubber it produces. Then there is raw wool, cotton. The impact on energy sources is attenuated by the fact that China is the third producer of electric energy in the world, thanks to its rivers. The great construction works the Chinese are engaged in will notably increase a production that already today amounts to more than half that of the United States. But we are only at the beginnings of Chinese development.
Looking at these figures the question I posed in 2000 in my book The government of the global world comes up again. At that date the affluent world consisted of not more than 7-800 million people out of a world population of 6 billion and a half. If 6 billion and a half reach the same level of affluence as the 700/ 800 million that we today consider wealthy, modern, western, what would happen? Is the earth capable of bearing a similar burden? China demonstrates that the problem is pressing. In one of its recent issues The Economist asked the same question.
A factory making electronic products in Shenzen, in the southern province of Guangdong. In the firsy six months of 2004 China’s GNP rose by  9,7% 
compared to the same  period in 2003

A factory making electronic products in Shenzen, in the southern province of Guangdong. In the firsy six months of 2004 China’s GNP rose by 9,7% compared to the same period in 2003

East Asia is becoming the main consumer of raw materials, going beyond the United States, historically the largest importer in the world. But an optical distortion makes us look at China as a separate phenomenon. If we put the countries of south-eastern Asia together, we find that 3 billion and a half have been moving for ten years at an average annual growth in GNP of 7%. The statistics demonstrates that world development, from the 1-2% of yesterday, has now reached 4%, precisely because the countries of south-eastern Asia are going ahead at a fierce pace. Apart from China there is India (which is progressing at a rate of 6-7%); but then Malaysia, Vietnam, South Korea, Taiwan, Sri Lanka, Bangladesh, Thailand, Nepal, Indonesia, Pakistan. Pakistan, which is lowest on the list of emerging countries, is going ahead at a rate of 4%, but has “only” 141 million inhabitants. Other countries must be added to this group, such as the Philippines and Russia, that have lower but still fairly intense rates. Finally, both Australia and Japan are moving strongly ahead, not least because they are important exporters to China. The countries of South America such as Brazil, Venezuela and Argentina are also recovering strongly.
Up to a few years ago the locomotive of world development was the US. Today the drive is coming from a state, one difficult to attack, that counts 1 billion and 300 million inhabitants, against the barely 300 of the US, and that is progressing at a great pace. The American economy is itself linked with that of China. The largest creditor of the United States, as holder of American state bonds, is China. At the same time, China offers good investment opportunities for American companies. The Chinese provide the Americans with moderately priced commodities and the phenomenon will probably continue for a long time because the Chinese yen is kept at a low exchange rate against the dollar and nobody is capable of imposing a different exchange rate. It should be no surprise, therefore, that, according to the forecasts, China could become the third largest exporter in the world after the United States and Germany. It is today the country that picks up the largest amount of foreign investment, replacing the United States of the period 1995-2000. Two thirds of photocopying machines worldwide and of all light electronics (DVDs, etc.) are Chinese, as are half of all digital cameras and about two fifths of personal computers. Its imports are also growing. They grew last year by 40%, which is about a third of the total growth in the volume of world imports. The more China grows, the more it exports, the more it needs to import, all of which influences the international price of raw materials, of loans, of commodities.
The US themselves, after the collapse of the USSR and after the effects of the new economy spread to the whole planet, rightly think of themselves as the hegemonic power in the world, and they are so considered by everyone. In the Iraq question they believed they could challenge the UN and decide substantially by themselves. In future they won’t be able to ignore the new autonomy in Asia...
If we lengthen the period of reference and calculate in terms of decades, China could well become the major importer and exporter in the world. The more developed part of China consists of around 250-300 million inhabitants. That is hardly a fifth of the overall population. The affluence of the coastal areas is expanding, even if gradually, to other areas, including the interior. Remittances from the Chinese abroad – making up 1% of the GNP, a sum significant for an understanding of the importance of the Chinese diaspora – are working in a similar way. It is inevitable that a phenomenon such as occurred in Italy in the post-war years that was brought about by internal emigration, with people leaving areas transformed by great work on infrastructures, moving from agriculture to industry and sending remittances to the more depressed areas, will also take place in China. It is likely that the development of depressed areas will not be as slow as might be thought. Another phenomenon not to be underestimated is that cities of five and ten million inhabitants have arisen in China, with names that probably none of us has ever heard, but which are more than twice the size of Milan. In one of these frontier cities, of about six million of inhabitants, there is a huge market and the Russians go there from Vladivostok to buy goods. Then they take the Trans-Siberian railway and resell them in Moscow…
The picture painted is not an end unto itself. It aims at furnishing some reflections on the political level. Chiefly in two directions. The area politically and economically dominant has been up to now the north-Atlantic. Supremacy could, in not much time, move toward Asia. 800 million people, calculating the US, Canada and the 25 European countries, will find themselves competing with a population that is already over 3 billion and a half. History teaches that large empires become endangered when they think they can continue to play the same role they had in the past even though objective conditions have changed. So it was with the Roman Empire, with that of East, for the British, for the USSR. The US themselves, after the collapse of the USSR and after the effects of the new economy spread to the whole planet, rightly think of themselves as the hegemonic power in the world, and they are so considered by everyone. In the Iraq question they believed they could challenge the UN and decide substantially by themselves. In future they won’t be able to ignore the new autonomy in Asia. They will have to be even more cautious should two pieces of news recently aired turn out to be true: Russia’s possession of a multinuclear warhead capable of evading American satellites and hence of questioning the military supremacy, till now uncontested, of the United States, and Russia’s role as supplier of military technology to China.
... They will have to be even more cautious should two pieces of news recently aired turn out to be true: Russia’s possession of a multinuclear warhead capable of evading American satellites and hence of questioning the military supremacy, till now uncontested, of the United States, and Russia’s role as supplier of military technology to China
The second point concerns relations with the Islamic world. The demand for oil products by China and its eastern neighbors will get ever more massive, and could become dominant. The ascertained reserves of oil are concentrated, at the present state of research, in the Islamic countries of central and west Asia. The consumer states could acquire a dominant position over the producer states. During its history China has not cultivated territorial expansion. But conditions might occur for economic expansionism. In such conditions, if one looks ahead to the long term, various questions arise. Is it sensible for the Euro-Atlantic area to exacerbate the quarrel with the Islamic world or should it not instead cultivate co-existence or integration of the kind which has been developing for centuries in many areas of the Mediterranean? Is not Islam as a link between the large cultural - even more than political - areas of the world preferable to an Islam pushed into the arms of China?
Driven by ethical principles, but probably also by ancient wisdom and an acute sense of its fittingness to history, the Roman Church preaches peace, tolerance and mutual understanding among the three great monotheistic religions, Christianity, Judaism and Islam. But numbered all together they do not reach the population of South-East Asia.


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