x Abu Dhabi, UAEThursday 27 July 2017

China's turn at the controls

As much of the world lingers in economic malaise, China is becoming the newest economic and political powerhouse. Expect more of the same in the coming decade.

By a large margin, the most-read news story of the first 10 years of the 21st century is not about the Iraq war, the September 11 attacks on the US or the death of Michael Jackson. It is about the rise of China.

For China, 2009 saw the world's most populous nation begin to wield its new political and economic influence as an emergening superpower, when attention was less on its rise than it was on what the country would do now that it had arrived. The analysis by the Global Language Monitor, based in Texas, seems to confirm what everyone has long suspected: China's rise is making an impact on ordinary people's lives and they are flocking to newspapers and websites to find out more. In many ways, this century so far has been China's.

Using the tag line Made in China. Made with the world, an advertisement on international television highlighted the way Chinese companies collaborate with foreign companies to produce high-quality goods. It shows a series of products, each with a label saying it is Made in China. This is a country looking forward after the consumer product debacles of last year. This new confidence was most evident at the Copenhagen summit on climate change where China managed to fight its corner with the heavyweight political powers, suggesting that next year will see it continue to flex its fresh political muscle.

Zhou Chunsheng, a professor of finance at the Cheung Kong Graduate School of Business, believes the 21st century has been China's century in terms of becoming increasingly important on the international stage. "In the 21st century, China has continued to develop at a fast speed and its influence is also maturing. But I also think the 21st century is the US century, because the US power and influence are still continuing impacting the world greatly," said Mr Zhou.

The first quarter of this year was the worst period for the Chinese economy, but what a recovery. "Premier Wen Jiabao once said, 'confidence is more important than gold'. And I could not agree with him more. I believe in 2010, enterprises' confidence will continue to grow and they will invest more," said Mr Zhou. "In 2009, many important events happened in China: the central government's strong stimulus plan has been carried out, and national financial investment has been enlarged greatly. Credit was expanded, China's exports went down rapidly, and economic has resumed growth, and people regained confidence for our economy."

On the basis of the statistics, Mr Zhou believes China has managed a V-shaped recovery and GDP growth of 8 per cent, or perhaps even 8.5 per cent, looks likely, and a further acceleration is expected next year. However, Mr Zhou warned of inflationary pressures next year. "Big credit expansion has cumulative effects. In 2010, central government's proactive fiscal policy and loose monetary policy will continue; consumption will go on growing; and the 2010 export situation will be better than 2009," he said.

Mr Zhou also expects an improvement in the export markets. "Consumer confidence will also grow up and [people will] go on buying things. All will help China's economy. Their confidence for China's economy has already been shown in the second half year of 2009," said Mr Zhou. The spread of China's influence is not only a great trend, but also an indisputable fact, said Sha Zukang, the UN undersecretary general for economic and social affairs.

In Mr Sha's view, the financial crisis has been an opportunity for China to get more deeply involved in the international decision-making process and to elevate its status and broaden its influence. This has been brought home by the powerful role China played in platforms through the G2 group of the US and China, which is taking on a new significance as the world economy continues to struggle. China's domestic demand looks set to continue to grow next year, with fixed asset investment up 25 per cent from a year earlier and retail sales up 18.5 per cent, the State Information Centre forecasts.

However, domestic consumption may not grow as quickly as it did this year considering expectations of rising inflation, Mr Sha told the Xinhua news agency. There is real self-confidence and a new self-assurance around, which is obvious from a November 6 commentary in the People's Daily on China's GDP growth of 7.7 per cent in the first three quarters of this year and about the country being on target to maintain 8 per cent growth in the full year.

"This fully proves that the central government's economic stimulus package for coping with the international financial crisis is timely, correct, powerful and effective, and China's economy is even more dynamic," the editorial said. "As the most direct and most important goal of the package, in the past year, China reversed the downward trend and maintained stable and rapid economic growth. Expanding domestic demand, especially in consumption, was set as a basic starting point."

With 700 million subscribers, China is the world's biggest mobile phone market. The country has more than 330 million internet users, far more than the US. China's GDP per capita will approach US$4,000 (Dh14,694) by the end of next year, says Li Peilin, the director of the Institute of Sociology at the Chinese Academy of Social Sciences. Between 1978 and 2000, China's GDP per capita increased from less than $400 to more than $800. Look at the trajectory - in 2003, China's GDP per capita surpassed $1,000. Last year, it reached $3,000.

Last year, observers stopped wondering whether China's magical expansion would evaporate as soon as the closing ceremony of the Beijing Olympics was over, and started looking and wondering about the billions of dollars lent to the US in the form of treasury bonds. China was a key figure this year in the effort to drag the world out of the economic mire. "Today, the Chinese economic recovery is becoming stabilised, bringing confidence and hope for the world economy and has played a constructive role in dragging the world economy out of its predicament," the People's Daily said in its editorial.

Recent visits by EU leaders, as well as President Barack Obama's maiden voyage to China, have been cordial but scratchy, and China is clearly more confident in the way it deals with the West than it was before the financial meltdown, which has hit the rest of the world much harder than cash-rich China. The talk in China is always about 30 years of reform, but the Chinese spent most of the 1980s and 1990s trying to build a functioning economy out of the wreckage of 30 years of centrally planned dysfunctionalism.

By the turn of the century, China began to emerge, creeping into the light and has not looked back since. On the contrary, China has grown in boldness, state coffers swollen by revenues from an expanding economy. Looking ahead to next year, there are more than a few niggling doubts about China's prospects. Many Chinese are worried about inflation and prices in many areas are certainly rising, even though official data show that consumer prices have fallen for most of this year.

Consumer prices climbed 0.6 per cent last month from a year earlier, ending a nine-month run of deflation. The country's top economic planning agency believes prices will stay largely stable next year, however. But in some parts of the country, there are rumblings of discontent about rising prices for essentials, such as garlic and rice. And there are growing fears about an asset bubble, particularly on the property market. But the century so far has been all China's and, for most commentators, that is not going to change any time soon.

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