1. CHINA AS AN ECONOMIC POWER IN TWENTY FIRST
CENTURY
Introduction:
China is an old civilization which has its deep roots in history. China is also a reference
of old philosophical, civilization and religious teachings and morality. Of Buddhism and
Confucianism, China is also significant because of its ideological affiliations and implications.
Communism interred in china in twentieth century which was traveled from Soviet union to
china and effected and changed the whole political, social and economic environment of china.
In spite of China’s importance of ideology, civilization background and social and cultural
system china has got popularity because of its economic strength and growth at the end of
twentieth century and in the twentieth first century. China’s human resources, industrial
development, enhancement of trade relations and its economic influence in international
economy are mentionable in this regard.
China is consisted of 10 % of total exports of the world and 8.2 % total imports of the world. Its
average annual GDP growth from 1979 to 2006 has been 9.7 %. China’s economic relations with
ASEAN, USA and EU are the practical example of its development as an economic giant in
international arena.
China has to face the music on international level on the bases of its political system and
authoritarian regimes that it lacks the democracy but china is being highly appreciated and
encouraged after economic liberalization in 1980s. China has shifted its economy from
controlled and command market to open and liberalized market which boasted the Chinese
economic relations and promoted its capabilities to enhance the production, investment and
organizational interaction.
All of these factors lead china to become the third largest economy after United States of
America and Japan. Chinese economic boom is going to be balanced the international system by
creating a threat for American hegemony over the international politics and economics. At this
time American economic influence and existence is very large as compare to china but estimates
show that china is an emerging threat and red signal for American hegemony.
An academic David Scott from department of history and politics in Brunel university Uxbridge
writes down [that they are three paradigms that twenty first century is the pacific century, twenty
firs century is the Asian century or twenty first century is the Chinese century.]”
2. This shows that Chinese economic development has compelled the people to think about the shift
and distribution of power in international structure.
In short Chinese rapid economic growth is a successful story which has many important
characteristics in it. Its trade expansion, industrial development, growth of foreign direct
investment, technological advancement, sophisticated environment skilled labor or technical
education and economic nationalism all are the main significant features of its rapid economic
development.
Economic liberalization in china and its impacts on Chinese economy:
Chinese was facing some problems for rapid economic growth because it had centrally planed
and controlled economy during 1960s 1970s that’s it was immensely needed to reform and
reduce the loopholes. China was begun to be shifted towards open market because it was
essential for growth by having compatibilities to international market. International market had
been liberalist capitalist free market except some exceptional cases like Soviet Union that’s china
realized the need of reforms to open its market. It was also necessary to boast the living standard
of Chinese common masses. Four economic zones were settled and tax collection mechanism
was revisited and state-owned enterprises began to transfer to the local level. As a result Chinese
economy began to grow rapidly, its production, industrialization and trade developed
tremendously in 1960s 70s and onwards1.
Chinese economic liberalization forwards open door policy began to show its fruits in agriculture
and agricultural growth festered soon after the economic reforms2. Economic reforms initiated
by Deng Xiaoping Chinese leader 1979 developed china in capital, the process of
institutionalization quickened and technological advancement increased. Economic openness
decentralized the economy which provided more opportunities for the growth and development.
These changing in economics led china towards political stability and consolidation
consequently. Economic instability creates political uncertainty that’s this Chinese movement
towards economic strength led to reduce political uncertainty.
Economic reforms effected upon construction which grew in 15 years per capita living space in
cities improved from 8.8 in 1986 square meter to 15.5 square meters in 2001.
1CRS Report for Congress, Is china threatfor US economy updated January 23, 2007
2
International Food Policy Research Institute www.ifpri.ordsrstaff/headevd
3. China’s journey to become economic giant:
China has been doing efforts for the success to become an economic power since three decades.
It has molded its internal situation in accordance with international structure to compete with
international competitors. It made the conducive environment to prepare itself by changing and
reforming the previous policies. Chinese policy reversed and gained the opportunity to become a
giant in 1978 and on wards3.
China’s sufficient in human capital it utilized it for the industrial growth and because of its huge
population it is and attractive market for the international players. Chinese leadership and
political stability is an other factor of its development. Cheap labor and extensive human
resources have geared its potential4.
GDP Growth
GDP gross domestic product of any country shows its economic strength and potential that how
much economic growth and production is being developed by that state. As for as china is
concerned its GDP has been growing from last three decades after opening and liberalizing
Chinese economic market. Economic reforms have led china to produce more and more and
gained the revenue5.
China improved itself so much that it overtook Germany in 1982 and its GDP average growth
was from 1979 to 2006 9.6 %. China has also created a challenge for Japan in 2003 by expending
its economy and specifically it’s GDP. Chinese GDP has been increasing in such a manner that it
has made wrong the estimates for example there was an estimate of its GDP about 9.5 but it
reached 10.1 in 2004.Table 1. China's Average Annual Real GDP Growth Rates, 1960-2005
Chinese economic potential is also shown by its GDP growth and purchasing power parity. For
example International Monetary Fund's estimate of the Chinese GDP of 10.1 trillion US dollars
in terms of purchasing power parity in 2010 as compared with the US GDP of 14.6 trillion.
According to this data and [World Bank report] Chinese GDP PPP is 69 % of USA. GDP equal
to 0.692 of the US GDP. The World Bank has provided a similar estimate6.
3
International Food Policy Research Institute httD://www.ifDri.orgsrstaff/ZhangX.asD
4
Cornell University www.people.cornell.edu.pages/sk145
5 The Heritage Foundation,"China's Outward Investment," at http://thfmedios3.omozonows.com/20
6
SEE New York Times jan15-2011
5. foreign banks established in during this period. Foreign investment and finances were extracted
to china. Financial and monitory policies were also proved conducive for economic growth of
china8.
Foreign direct investment: China is one of the biggest countries of FDI which is investing in
parts of the world. Lot of countries is also investing in china like USA South Korea, Hong Kong
and Virgin Islands.
FDI has been increasing in china particularly after economic reforms. It increased from 636
million dollars in 1983 to 61 dollars billion in 2004.It is growing with passage of time as the
demand and consumption is increasing FDI is also improving. USA, Japan South Korea, Hong
Kong, Virgin Island are the investors on high rank in china.
CHINESE TRADE RELATIONS AND ITS ECONOMIC TRIUMPH:
UNITED STATES OF AMERICA, EUORPIAN UNION AND ASEAN
CHINA and UNITED STATES OF AMERICA:
China and USA had been ideological differences because china was a communist state while
America was pursuing with capitalist liberalist democratic ideology that’s why both of the states
could not establish economic and diplomatic relations. At the end of 1970s china and USA
started diplomatic relations in 1979. Consequently economic and trade relations were begun
between the both and as a result china and America signed bilateral agreement in july in 1979.
The status of most favorite nation is very important for the development and improvement of
trade relations so both china and America gave the status of most favorite nations in 1980 to each
other.
China’s and US economic and trade relations have been growing rapidly, it boomed soon after
economic liberalization so that china made itself capable and closer to international market that’s
why exports and imports between grew quickly. The exports and imports increased from 5
billion dollars in 1980 to 20 billion dollars in 1990. IT further developed and improved and it
reached 343 billion dollars in 2003 which almost doubled in 2010 and it is more than 600 billion
dollars now China is the third largest trade partner of America after Canada and Mexico. China
8
China's Financial Development and Economic Growth: Exploring the Contradictions,Jean-Claude Maswana
Graduate School of Economics, Kyoto University, Japan
6. is enjoying strong trade relations with USA because it is a big market for American it is also
because of its molding policy of its economic structure which consequently gave the opportunity
of china to become ten member of World Trade Organization WTO in December 2001 Chinese
exports to America grown because it was 15.3 %of total Chinese exports in 1986 which grew to
33.1 % of its total exports in 2004.
Is china a threat for American economic hegemony?
The most hot topic and critical question in the contemporary scenario that will china surpass or
take over United States? The answer of this question is not very simple but it can be said that
Chinese rapid economic growth in last thirty years put forward many fears for USA to sustain its
economic monopoly over the international system. An important feature in this regard is that
generally Chinese growth is exaggerated by some economists and academics9. No doubt china is
growing very fast but American economy is eight times bigger than china. America in
industrialization, trade, investment, production, per capita and annual GDP is more developed
and better than china but in future perspective china’s economic hegemony can never be set a
side China with 2000 dollars per capita and America with 42000 dollars per capita are not equal
in present time but estimates show that in one or two decades china will be the biggest economy
as it is shown in IMF reports Chinese development to open its market is an other factor of its
growth as it is shown in pool of Globscan that 74 % Chinese are in the favor of economic
liberalization.
CHINA and MEMBER COUNTRIES OF ASEAN:
Association of south east Asia established at 1967 which developed a platform of ASEAN
members to integrate and economically grow and china got this opportunity to not only influence
but also enhanced its trade relations so china gained this opportunity positively to groom its
economy and influence in the region. .
China got success on its cultural diplomacy and economic diplomacy by developing its trade
relations with the members of ASEAN. China developed its proper contacts in 1990 for
economic cooperation. China has also created a tough time and challenge for USA and Japan
though Chinese trade remained lower than USA but it is estimated to accede. China gave a tough
9
ASIAN PERSPECTIVE, Vol. 32, No. 3, 2008, pp. 171-182. Commentary.DOES CHINA'S RISE THREATEN
THE UNITED STATES?,Jinghao Zhou
7. time to Japanese investors in the region. China is also participating in ASEAN its important role
according to ASEAN+3 which included China, Japan and south-Korea
China’s trade with ASEAN:
China is a big market for ASEAN countries that’s imports and exports increased a lot between
china and ASEAN from 1990 to onwards US and Japan trade is more than china but china had its
trade with ASEAN 160.9 billion dollars in 2006 while us had 168.5 billion dollars .China is also
facing the problem of trade deficit with ASEAN. In spite of that china wants to have free trade
agreements with ASEAN members and some of them have already signed FTA with china is
using soft power to boast its relations. The term is introduced by Joseph Nye in his book [Bound
to Lead The Changing Nature of American Power] published in 1990 and this concept is further
stepped forward in his book [Soft Power] in 2004.
China is fifth largest trade partner of ASEAN and ASEAN is sixth trading partner of china is
importing machinery, rubber, palm oil, rice. Textile, petroleum products and paper etc from
ASEAN countries China is one of the largest countries having foreign direct investment in
ASEAN countries. China is investing in Malaysia Indonesia as well as Singapore on different
projects on large scale but Chinese FDI is declined after financial crisis of 1997 in ASEAN and
now recently it is improving in many sectors.
Chinese aid as an instrument of diplomacy:
China is one of the donors which is giving economic support and assistance to ASEAN countries
that is very effective technique of economic diplomacy. China is making more and more its place
in ASEAN because Chinese economic aid is unconditional which is more effective than other
donors like Japan and USA in south East Asian region. China hasn’t any issue of economic
reforms and it is not concerned with the promotion of democracy as USA is concerned about it.
China is providing loans assistance to ASEAN countries and other agreements are being
conducted like FTAs which provide a chance to analysts to think that china would be the largest
aid provider in near future.
How much aid is being given by china to ASEAN countries it is not easy estimate because of
lack of sufficient data because china is reluctant to open it. China is giving aid to least developed
and economically poor countries like Burma, Cambodia and Laos though Japan is the largest
donor and US is also giving aid to Cambodia and Laos but china is assisting without any
condition which is often criticized by the west on the ground that it is harmful for promotion of
democracy in the south east Asia. China is assisting these countries and providing economic as
well as technical assistance and it is working a lot of projects and giving infrastructural aid as
8. well China provide 5 billion loans to Burma in 1988 and it is announced to give 200 million
loans in 2003.China is also considered a largest donor of Burma which about 2 billion dollars.
China also promised to Burma to give 200 million dollars in 2006. China is helping Burma in
infrastructure and loans. Cambodia is also receiving aid from china. China announced 600
million dollars in 2006 for Cambodia but USA Germany Japan are providing more aid than china
was ready to 236 million dollars assistance to Cambodia from 2007 to 200910.
China is giving assistance to Laos in form of loans and assistance11. According one report china
was second largest donor of Laos in 2001 and 2002.Chinese president offered 45 million dollars
in 2006 during this visit to Laos China is also economically supporting. Vietnam and it
announced 200 million dollars aid in 2005. While France and Japan are the largest aid providers
and china’s role is limited as compare to other economic giants in Vietnam.
China is a donor of some more developed countries like Indonesia, Philippines and Thailand.
China announced 49 million dollars assistance to Thailand in 2006.Indonesia is also getting aid
from china though china is not the largest donor but in 2002 Chinese aid was doubled and 2005
an agreements was also signed between for strategic cooperation and loans were too promised by
china. China gave assistance to Indonesia after Tsunami. Philippines are getting Chinese aid
along other donors like Netherland, USA Germany and Australia.
CHINA AND EUORPIAN UNION: ECONOMIC AND TRADE DEVELOPMENT:
China and European Union EU have established its diplomatic relations in 1975 which grew with
passage of time. China and EU are enjoying economic relations in form of trade investment but
still some problems are also being faced by both sides, one of the most influential issue is that
china is highly criticized and Europe is stressing upon the changing in accordance with EU.
China faces the music by EU on the ground of political differences between china and EU.
Economic relations grew tremendously after 1989 between china and they are more stable than
before, but European investors and business class also have some reservations about china as
well. China’s and EU trade relations improved 400 % in last ten years that shows the potential
and growth capacity to be increased. Trade relations increased from 101 billion Euros to 395
billion Euros in one last decade. EU export to Chinas grew 113 billion Euros in 2010 while it
was 26 billion in 2009 China’s imports are also grown for example it was 75 billion Euros in
10
MonitoringAsiaPacific,October12, 2006.19 JeffreyYork,"The Junta'sEnablers," International News,
October6, 2007; David Steinberg,"Burma:Feel-GoodU.S.SanctionsWrongheaded,"Yale Global Online,
May 19
11 Organization for Economic Cooperation and Development (OECD). [http://www.oecd.org/home/]
9. 2000 and it reached to 282 billion Euros in 2010.Chinese exports are consisted of 13,9 % while
its imports are of 18,9 % total trade of EU that’s why china became the second largest trade
partner in 2007.Chinese total trade is consisted of 17 % on its trade relations of EU so in 2006
EU got the largest trade partner of china. Germany is the largest trading partner of china which
has 43 % of total EU exports to china and 21 % imports from china in 2008.Germany, Italy,
France and United Kingdom consist of 70 % of total exports of EU with china in 2008.
EU states are also investing in china it was immense in 1990 which decreased in last ten years.
FDI is also an other sources of inspiration between EU and china which was 8.3 billion Euros in
2009.
China’s membership in WTO in December 2001 accelerated the trade ties with EU. Chinese
economy has been more and more liberalized so trade negations and scope of cooperation has
grown.
They are also some irritants in trade relations between china and EU which are political as well
as economic. Consequently the problems of trade deficit are being faced by both of the sides.
Trade barrios are making inharmonious condition for trade growth and as a result European
investors are hesitant to invest in china. Intellectual property rights also render the trade.
Corruption and irregularities also make difficult to boast relations in economic sphere. It is
essential to negotiate to solve these problems for the more and more comprehensive and
comfortable environment12.
CONCLUSION:
China’s potential and it’s economic influence as well as relations are discussed in this paper.
China is not only a regional power but also it is global level hegemonic power which has created
a future threat for United States of America and Japan.
China’s economic development and market reforms has provided it to enhance its relations with
Asian pacific region as well as with outside of the region like Europe and America, whether
Latin America or North America.
Chinese economic growth has also led it towards the military might because without economic
development military and nuclear hegemony is not possible.
China’s rapid GDP growth, industrialization, productivity, technological advancement, trade
relations, organizational behavior, institutional reforms, foreign direct investment, foreign aid
program and political stability all of these aspects have forced the scholars of international
12 Organization for Economic Cooperation and Development (OECD). [http://www.oecd.org/home/]
10. relations that china is super power in near future. It is estimated that china in one more decade
would be the super power but china is needed some more changes in its political and economic
system to faster its growth like democratization.
China’s use of soft power is its diplomatic success to improve its economic influence and trade
relations.