Last week’s trade delegation to Japan and China led by Minister for Enterprise, Trade and Employment, Micheál Martin is just one of a stream of business visits to the widely perceived next superpower-China. Is this expectation misplaced?
In 1999 the late Gerald Segal, an IISS expert on China in an article titled “Does China Matter?” said “China is better understood as a theoretical power – a country that has promised to deliver for much of the last 150 years but has consistently disappointed.”
For over 100 years, many have been mesmerised by the potential and size of China. Most have been disappointed. Is now different?
Many do not see beyond the image of the most populous country in the world with a population of 1.3 billion moving into a post-Communist consumer society. However, current estimates indicate that by 2050 the largest country in the world population-wise will be India. In the meantime, China will be going through major dislocation because of a number of negative factors in its demographics. The population of China is currently ageing at a rapid rate. China has the unusual distinction of being the only society experiencing such without any social safety net. The impact of this “slow motion humanitarian tragedy” as one expert put it will be immense. On top of that the gender imbalance in China is dramatic. Recent statistics show that China’s sex ratio at birth is 120 boys to every 100 girls, where the norm should be 105 boys to 100 girls.
There is a huge level of unrest in China at present. Such will escalate when millions of young men enter the marriage market without any possibility of having a lifetime companion. When this happened previously in China, it led to social unrest, localised anarchy and eventually the Nien Rebellion.
Many would see Chinese growth overriding such negatives. The statistics reflecting this growth need to be put in context however. The population of Taiwan is approximately 23 million. Yet China’s GDP is only 6 times that of Taiwan despite its population of 1.3 billion. Comparing China with its less-frequently mentioned rival in Asia, India, from 1999 to 2003 in six major industrial sectors, Indian companies gave investment rates of return significantly higher than their Chinese competitors.
The real growth rates achieved by China have been the subject of some dispute. However, last years economic census in China appears to confirm that China grew on average by 10% p.a. over the last 15 years.
These growth rates have come at a high cost. Approximately 75% of Chinese bank loans are non-performing. The Chinese Central Bank itself has indicated that politically directed lending was responsible for 60% of bad bank loans in the period 2001/02. Part of the reason for this is that approximately 5.3 million party officials held executive positions in state enterprises in 2003, while the party appoints 56% of all senior corporate executives currently.
Many Chinese social indices show a dismal picture. There are significant levels of environmental degradation and pollution in many of the main cities in China at a level that is a threat to health. In essence the Maoist Communist era has given way to neo-Leninism which has three main features; firstly, rampant corruption which in many areas embraces the entire Communist Party structure; secondly, the worst excesses of unbridled crony capitalism such as was seen in the US in the 19th century; and finally, a dangerously-growing inequality.
At present, it is estimated that less than 1% of Chinese households control 60% of the wealth of the country, an imbalance well understood by its people and one that is five times worse than the US. Despite much hype reform has in essence failed to date. Economic freedom is still very low – in East Asia only Viet Nam and Burma have a lower level of economic freedom. The World Bank rates China poorly in the provision of services to its citizens with a rapidly declining real investment in both education and healthcare. The World Health Organisation states that the fairness of the Chinese healthcare system is below all other countries in the world with the exception of Brazil and Burma. Little wonder that there is a massive growth in unrest in Chinese cities and in the countryside.
All these developments explain some of the surprising findings in a 2004 Gallup poll of attitudes amongst Chinese workers and consumers. Contrary to what many expected the primary aim of Chinese workers was not to work hard and get rich. In a surprisingly rapid arrival of the “me” generation, self-satisfaction was the number one motivator in the big cities of Beijing, Guangzhou and Shanghai, and the principle objective of younger workers. Gallup also found that 88% of Chinese employees were not really interested in their job, and contrary to the impression that Chinese consumers had a lot of money to spend, the average household income in 2004 was still less than US$1,800.
Overall, it is clear that China, a country with a great culture and real influence from same, will have a significant impact on the world’s economy and social development. However, that impact should realistically be more accurately seen as that of a middle power or a regional colossus rather than a superpower. In the near term the above more balanced assessment of China’s development to date suggests that the possibility of significant fallout or a major crisis is quite high.
After a robust debate on many of these issues in the journal Foreign Policy, Minxin Pei of the Carnegie Endowment for International Peace said “whatever happens, one thing is certain: a regime so burdened by corruption, cynicism and decay will hardly turn China into the next great superpower.”