Gonzalo Garland. International Relations Director. Instituto de Empresa
22 June 2004
China is growing at a dizzying rate, and already playing a more important role on the international stage.
When reviewing the economic press, we should no longer be surprised by the increasing importance that China holds in the world economy. A few recent examples can be found in the inflated international prices of soybean, copper or steel in response to greater demands from China; or in growth figures for the Japanese economy, largely due to increased exports to its neighbor.
While China has provided the principal source of economic growth in the region in recent years, we must not forget other countries that have also been developing at a tremendous rate. Among these, India is a particularly noteworthy case. It underwent enormous transformation throughout the 1990s and its GDP has climbed at an ever-increasing rate. On the other hand, the most negative effects of the Asian crisis of 1997-98 seem to be subsiding, and the worst-affected countries are throwing up respectable growth figures. Nor should we underestimate the effect this growth has had in the region on nearby countries, such as Australia, which was one of the developed states with greatest economic expansion throughout the last decade.
Taking all this into account, we should not be surprised to find that many analysts are starting to refer to the 21st century as “the Asian century,” while others prefer calling it “the Chinese century.” If we also consider the population and GDP of China, Japan, India, Hong Kong, Indonesia, Korea, Malaysia, the Philippines, Singapore, Thailand and Vietnam, together they represent almost half of the world’s population and nearly 24 percent of the world’s GDP. If we add Australia and New Zealand, the percentage of the population does not vary substantially, yet the percentage of GDP becomes a quarter of the world total. In addition, if GDP is measured considering Purchasing Power Parity (valuing physical production at the same cost in every country), China is already the number-two world economy (representing 56 percent of the American economy) and the region as a whole represents one-third of worldwide production.
After observing China’s expansion over the last few decades, and, to a lesser extent, that of many of the countries in the region, everything seems to indicate that such growth will continue over the next few years, though perhaps at a more moderate rate. However, at this moment, such moderation does not appear to be taking place. The latest annual growth data for several countries are pretty encouraging: 9.9 percent in China, 8.4 percent in India, 6.5 percent for Thailand, 6.4 percent for Malaysia, and so on. Even one of the countries being left somewhat behind - South Korea - is growing at a healthy 2.3 percent. Nevertheless, the main cause for concern in the area is still Japan. While the most recent data are very encouraging, the growth that is being observed is still fundamentally due to the export sector, which means the country is highly vulnerable to external upsets - particularly if these were to occur in China or the United States. On the other hand, the country must face up to some of the structural problems that still afflict it, such as bad loans in the financial system or the demographic trends that are threatening the entire social security system. In the case of Japan, these trends are the most extreme to be found anywhere.