Sunday, January 13, 2008

Is the Chinese Economy Really Strong?

The economy of China is expanding rapidly these days. Some people say China will grow to become a real challenger to the American world order in this century. There is no doubt that China is exploring bigger stake in global politics and economy. Global American Discourse has published a few posts on China’s military ambition in the past as shown below.

US Policy against China’s Military Build-up
1-11 Shock: Reagan Diplomacy Needed against China’s Ambition in the Space

In addition, Chinese leaders regard the Beijing Olympic this year as a spring board for greater power. China is exploring the same path followed by Japan in 1964 Tokyo Olympic and South Korea in1988 Seoul Olympic.

In such harsh power rivalries on global and regional stages, the World Bank announced on December 18 last year that the economy of China had been overestimated, and it was 40% smaller than previously thought. The Bank uses purchasing power parity (PPP), which focuses on individual consumption, to evaluate wealth and poverty of 146 economies. According to this survey, the richest nations in terms pf per capita PPP are Luxemburg, the United States, Iceland, Britain, and Norway. Despite this, China still remains the second largest economy after the United States in the Bank’s ranking.

Prior to the World Bank’s press release, Albert Keidel, Senior Associate of the Carnegie Endowment for International Peace, has contributed an article, “Limits of a Smaller and Poorer China” to the Financial Times on November 14 last year. As I mentioned in the previous post, “Carnegie Report on Economic Growth and Rural Society in China”, Albert Keidel has conducted field researches with Liu Jiaxing, at the International Cooperation Center of the National Development and Reform Commission in China. Also, several Chinese assistants helped his research. Therefore, his analyses are not Western-centered, and reflect Chinese viewpoints very well.

Let me summarize and review the article. According to Keidel, recent surveys by the Asian development Bank and the World Bank concludes that “the number of people in China living below the World Bank's dollar-a-day poverty line is 300million - three times larger than currently estimated.” This is an astonishing figure, and roughly a quarter of China’s total population.

As China had never participated in international price surveys, it is difficult to calculate its PPP in dollars accurately. In view of large shares of the world’s poor in rising economies, including China, India, and Brazil, World Bank President Robert Zoellick argues that the Bank continue to lend them. Keidel says that China will not grow big enough to challenge American predominance so immediately as often argued among some opinion leaders. Rather than focusing on Chinese military threat, he advises that the Unites States and it allies help China’s economic development conductive to political moderation.

Economic analyses presented by Albert Keidel sound rational and persuasive. Then, why do Chinese Communist Party leaders quibble over the American world order? China’s military build-up is extremely rapid. Its ambition in the space is evident.

Security is not the only issues which China explores vigorous rivalries against the West. At press conferences, the Chinese government accepts questions in Chinese only. In addition to the language, the Chinese authority has been continually defying universal ideals of enlightenment, human rights, and liberty.

Apparently, China tries to rival against America, or more broadly, against the West. Why? Are the Chinese willing to sacrifice poorer economy to challenge the West just as the North Koreans are? It is a mystery. America, Europe, and Japan need further watch on China.