China and Asia on the road to Economic Supremacy

RECENTLY, the World Bank, in association with the International Monetary Fund (IMF), has published a report titled, “China---2020” which analyses the present economic progress of China and predicts that within 2020,she will become the second largest exporting country in the world, next only to the USA. The reports says that the four original tigers of Asia, namely Taiwan, South Korea, Hong Kong and Singapore would be defeated by China on the economic front and within the next 20 to 25 years, China will emerge as the supreme economic power in Asia. The inclusion of Hong Kong in China in July this year would certainly hasten the process.

The report says that China, after adopting economic reforms I late 70s by Deng Xiao Ping, is progressing at an amazingly fast rate. From 1978 to 1995, its GDP grew at an average rate of 9.4 per cent per year, which is a record and it helped 200 million Chinese to cross the poverty line. President Jiang Zemin at the recently held 15^th Congress of the Communist Party of China highlighted various other achievements of the economic reforms introduced by Deng. He also gave a hint that within next five years most of the public sector undertakings would be handed over to private entrepreneurs. Shri Vikram Nehru, the World Bank’s expert in Chinese affairs, feels that this process of privatization would utilize the production capacity so far lying idle and hence help to raise GDP. According to Shri Nehru, China would be able to maintain an economic growth at least at the rate of 6.5 per cent per year without any difficulty and if a growth at this rate continues for next 25 years the volume of Chinese economy would increase seven-fold.

In China today, including small and large-scale units, there are nearly 300,000 enterprises run by the government and they consume nearly 75 per cent of the domestic investment. In return they produce 50 per cent of GDP and nearly one-third of the total export. At present nearly 150 million people are working in these units. Most of these enterprises are overstaffed and incur loss every year and at present their total debt stands at  $100 billion. To tackle the situation, President Jiang Zemin has submitted a proposal, known as “Jiang’s Plan”, at the said 15^th Party Congress held in September this year. The Plan proposes large-scale privatization of the public sector undertakings except only 1000 large and strategically important units. Experts feel that within the next 20 to 25 years, the era of domination of world economy by the USA and the European countries would end and Asian countries, especially China and India, would dominate the field. The party members attending the Congress supported the Plan and voted Shri Qiao Shri, the chief rival of President Jiang, out of the Congress for speaking against the Plan.

During the first six months of this year, China’s export has increased by 26 per cent, import decrease by 0.1 per cent and this led to an increase of trade surplus to the tune of  $ 17.8 billion. The main reason for China’s success in the competitive world market is its large population (now 1.2 billion) and the unending supply of cheap labour. A constant flow of people migrating from villages to the cities keeps wage level low and it is expected that this situation would continue for the next 30 to 60 years. In addition to that, within the next five years nearly 25 million people would be laid off from the government-run establishments as a result of the process of privatization under Jiang’s Plan and this would further check any tendency of rising wage in the near future.

On the other hands, populations of four original tiers and three new tigers, namely Malaysia, Indonesia and Philippines are very in comparison to that of China and in addition to that, the standard of living and wage rate in these countries have gone up. During the past 25 years the per capita income in Singapore, South Korea and Taiwan has increased five to six fold and in Malaysia, Indonesia and Philippines, three to four fold. So the foreign investors who were investing in the south East Asian countries are now shifting their business to China. As a result the volume of foreign investment is also piling up in China. In 1987, the total foreign investment in China was $2.3 billion and in 1995 it shot up to $38 billion.

Earlier, big Japanese corporations invested billions in Thailand but now they are shifting their business to China. The Matsushita Corporation is now shifting its business from Thailand to China with a new investment of  $ 3.3 billion. Big Taiwanese companies started investing in China in 1980 and now nearly 3000 Taiwanese companies have invested $ 36 billion there. A major drawback of the south east Asian countries is that they are running short of educated technical manpower, whereas in China the technical work force consisting of 1.9 million university educated engineers is on the higher side than the present need. For this reasons the companies, who are intending to compete in the high-tech field are also selecting China as their place of business activity.

In 1996, GDP grew at the rate of 6.8 per cent in India and at the rate of 9.7 per cent in China and according to experts; India will be able to improve its rate of growth in the near future. According to Shri Jeffrey Sachs, director of the Harvard Institute for International Development, it would not be difficult for India and China, the two giants of Asia, to maintain a sustained growth at least at the rate of six per cent. Since the Asian mentality is more prone to saving, Shri Sachs believes that the actual growth may increase further.

Most of the experts feel that within the next 20 to 25 years, the era of domination of world economy by the USA and the European countries could end agenda and Asian countries, especially China and India would dominate the field. During the 1950s, Asian countries contributed only 17 per cent of the world GDP and last year it increased to 40 per cent. Shri sachs feels that this figure would cross the 50 per cent mark by the first decade of the 21^st century.

In 1995, production of steel (in million tonnes) by the major steel producing countries of the world was as follows: Japan-101.6, China-93.0, USA-93.1, Russia-51.4, Germany-41.8, Italy-27.7, Brazil-25.1, South Korea-36.8, Ukrain-21.8 and India-20.4. So it appears from these figures that the Asians countries produced 252 million tons while the USA and the European countries jointly produced 232.8 million tones of steel. Since production of steel is considered the index for industrial development, the above figure shows that in the industrial sector, the Asian countries have already excelled the USA and the European countries. Since economic power gives rise to political power, it can be said that within a few decades the Asian countries, mainly India and China, would also dominate worlds politics. It is certainly good news for the people of Asia and Africa since for the past two or three centuries the Europeans forcibly occupied and looted the countries of these continents and inflicted untold misery and atrocities on them for becoming rich.