If current trends continue, then in 25 years, most countries will be beholden to China.
Some because they will be financially indebted – today’s Greece, Portugal and Spain, others because their economic and industrial well being would not have been achieved without Chinese injection of capital or engineering and construction – many African (trade increased by 10 times in a decade to $100bn; most of it in infrastructure projects which has a multiplier effect on economies; eg a 900 mile railway renovation project in Angola) and increasingly Latin America (see sidebar); and some central Asian nations. Yet others because China treated them as equals and traded with them without strings when most Western nations looked upon them as pariahs – Burma, Iran, North Korea and Zimbabwe to name but a few.
China is on track to become Brazil’s No. 1 investor in 2010
Another set of nations will be indirectly grateful because China paved the way for contract manufacturing, and as the so-called ‘China price’ rises steadily (see sidebar) – wages have increased by up to 30% in the past few years, especially in large factories aimed at mass production’ and the yuan keeps appreciating - and Chinese factories move up the quality chain, these nations start to become the factories of the world – countries such as Indonesia, Malaysia, Philippines Vietnam, Thailand, Sri Lanka, Turkey and Mexico – as also some ex-Soviet satellites in eastern Europe. This is already happening for certain goods such as textile goods and low-end electronics.
China will likely see “strong” increases in salaries in the five years through 2015 as the nation’s supply of labor dwindles and consumers begin to spend more and save less, Credit Suisse Group AG said in a report.
Wages may increase to be equal to 62 percent of China’s gross domestic product by 2015 from 50.5 percent last year, a team of Credit Suisse analysts led by Vincent Chan and Peggy Chan wrote in a report.
China’s leaders said last month that boosting incomes is a major task for the nation in its 12th Five-Year Plan (2011-2015).
From China Daily - May 2011
What is not commonly known, according to HE Liu Xiaoming, Chinese ambassador to Great Britain, is that China is the largest peacekeeping troop contributor of the UN Security Council, having sent c10,000 peacekeeping personnel on 24 UN missions; that, in addition to trade-aid support to 69 developing countries, it has also sent medical teams of 21,000 doctors and nurses treating 260 million patients in 69.
Our perception is that there will be four countries resentful of China’s achievements and standing: the USA because of it losing its position as Number 1, either by 2036 or not long after; India, because of its rivalry for the top rank within the 21st century as well as a not quite resolved border dispute; Japan due to long-standing historical envy and enmity; and finally Russia who may be tempted to hark back to the Stalin-Mao era when China was the follower and Russia the leader. However, the reality of China looms large. Oleg Deripaska who runs Rusal the world’s biggest aluminium group in June 2011 said he is planning to invest billions of dollars in Siberian hydroelectric plants to supply northern China with power. It is not an altruistic plan but rather one of creating mutual benefit.
There are also potential issues with some of its neighbours due to either diversion of water, such as with Burma and India, or due to contested seas for either fishing or mineral extraction reasons.
In addition, not all African reaction will be positive. Already an estimated 1m Chinese live and work in Africa – not all on large construction or mineral extraction projects. And of those there is resentment that so many jobs, such as 10,000 in construction, that could go to Africans are not. Quite different from colonial times when only the ‘sahibs’ were non-African. Furthermore, there are an estimated 1,000 small traders operating shops and other SMEs. It is not entirely clear whether they are adding or reducing jobs for Africans. It should be noted that unlike Western powers, China regards Africa not as a continent in need of aid, but as a vast continent full of opportunity. (See The Dragon’s Gift: Deborah Brautigam.)
More recently, large tracts of arable land in Africa are being acquired by foreign firms including the Chinese. Most of the land will be used to grow crops. But some are earmarked for biofuel rather than human consumption. This has both a positive and negative effect. Positive as the investment and yield are likely to be substantially higher. Negative, as the produce is more than likely to go abroad, leaving Africans even shorter of food than ever. Land is being bought elsewhere, such as in Australia and South America.
Tom Friedman, NY Times, author of The World is Flat, is supposed to have said: One of the most unsettling things about the Chinese is not their communism but their capitalism.
Rivals: How the Power Struggle between China, India and Japan will shape the Next Decade
In the view of Bill Emmott, ex-editor of The Economist (1993-2006), there will be, hopefully, a three-way balance of power. He sees great parallels between China of recent decades and Japan from the Meiji Restoration to modern times. However, he hopes that the military belligerence of the Japanese during that period will not be repeated by the Chinese, not least (according to Martin Jacques, the author of ‘When China Rules the World‘) because of the invisible but real resumption of a tributary state system with China in the middle – hence Middle Kingdom surrounded by a host of sovereign states paying tribute to China. Nevertheless, Emmott worries that Tibet may prove to be the flash point between China and India.
Additionally, apart from any border dispute, there is an inevitability about water dispute. Earlier, we mentioned China’s plans to divert water from its wet south to the dry north along three canals. The western most starts in Tibet and if implemented could have severe consequences for India as one of the rivers to be diverted (40 billion cubic metres a year), the Yaluzangbu, is also one of the main sources of the Brahmaputra a main tributary of the Ganges.
In the view of Dambisa Moyo, ex-Goldman Sachs, author of ‘How the West was Lost’ there are three significant differences between ‘the West’ and China that will cause this sea-change to happen within a few decades:
the Western approach to personal and national wellbeing through debt financing versus the Chinese (and Indian) propensity to save and spend from savings.
the Western attitude to children as creatures to be pampered and who hanker for instant fame and fortune in entertainment or sport versus the Chinese (and Indian) attitude that children must be educated and steered to seek meaningful and worthwhile careers.
the Western attitude to individual human rights often to the disbenefit of the greater whole – which we see in the UK in the overly ‘liberal’ interpretation of the European Human Rights legislation versus the Chinese attitude that the majority needs to be protected, sometimes at the cost of the minority.
- China’s commodity demand declining: Credit Suisse (marketwatch.com)