This week’s revelation that China has overtaken Japan as the world’s second-largest economy was anti-climatic. With China growing at about 10 per cent a year for the past 30 years or so, and Japan entering its third decade of stagnant growth, the change in status quo has been long expected.
Still, the milestone sparked predictable hand-wringing in many quarters. Will it be 20 or just 10 years before the Middle Kingdom also surpasses the U.S. in size? Will Beijing eclipse Washington as the corporate colonizer of Latin America, the Middle East, Indonesia and other less-developed nations?
“While the 19th was the European century and the 20th the American century, the world seems to have entered what may become known as the Chinese era,” says Jean-Pierre Lehmann, professor of international political economy at IMD, the distinguished Swiss business school.
But one has to be careful in forecasting superpower status. In the 19th century, it seemed that Russia, Brazil and Argentina were poised for economic greatness. Impressed with Canada’s rapid growth that century, Benjamin Disraeli predicted Canada’s emergence as “the new Russia.”
China itself was once by far the world’s biggest economy. As late as 1820, it accounted for one-third of global GDP. But from the 1840s until a few years after the death of Mao Zedong in 1976, China languished for some 130 years as the world’s largest irrelevant nation. It was hobbled by bureaucratic corruption and routinely savaged by marauding outsiders, the Opium Wars being only the best-known example to Westerners.
There’s no question that China’s second blossoming is vastly different. Its liberalizing economic reforms of 1979 unleashed an industrial revolution of unprecedented speed and global impact.
China today is the Western world’s workshop. Low-cost Chinese goods on sale at Wal-Mart have kept inflation in check and lowered the cost of living from Mississauga to Manchester.
China this year became the world’s biggest exporter, overtaking Germany; and the world’s biggest consumer of energy, displacing the U.S. China is now the world’s largest car maker, turning out more vehicles than the U.S. and Japan combined.
But the question isn’t whether this spectacular growth is sustainable. It isn’t. Trees don’t grow to the sky, and economies don’t grow at 10 per cent a year indefinitely.