http://www.financialpost.com/news-sectors/story.html?id=2421300When
I toiled as an editor at The Financial Times of Canada in Toronto 30 years ago, one of our top writers, an old Hong Kong hand, would occasionally write about the coming emergence of China's economy. He would argue persuasively that more than a billion Chinese would soon be buying our TVs and Chevies, a vast market waiting to be exploited, an endless opportunity for savvy exporters.
As it happened, China turned the export equation on its head. As 2010 dawns, the expectations of 1980, triggered by Beijing's economic reforms beginning in 1978, have been dashed, with most of the goods going across the Pacific heading the other way. While the flow of raw materials to China from North America is impressive, many of those boatloads of stuff are being fashioned by cheap and plentiful labour into goods to be shipped back in millions of containers and on to the shelves at our malls.
You may be forgiven for thinking that last year was the year of the Tiger (Woods). In fact, on the Chinese calendar, 2010 is the year of the tiger. And though the year doesn't officially begin till Feb. 14, China has been acting like a tiger for decades now, roaring mightily and happily eating our lunch.
Indeed, as the University of Hawaii's East-West Center noted this week as it celebrated 50 years of promoting understanding of the Asia Pacific region and the United States, the whole of Asia will continue to lead world economic growth for years, perhaps decades, to come, with China leading the way.
Charles E. Morrison, president of the East-West Center, said in a recent commentary that Asia's rise to economic prominence is not unprecedented. "Two hundred years ago, eastern and southern Asia accounted for half the world's goods and services, but by 1960 had shrunk to less than 20%. But in the past 50 years, Asia has made a remarkable comeback to about 35% of the world economy today, and by the middle of this century or even earlier, it should again reach 50%."
So, the 21st century will be Asia's - and especially China's - century.
The Chinese tiger, growing by 8% to 10% annually, will continue to lead the Asian advance. Already, China's gross domestic product in purchasing power parity, a measure that most economists rate highly, is second only to that of the United States, which was US$14.4-trillion in 2008. China's was US$8-trillion. And with the U.S. economy shrinking last year and China steaming ahead about 8%, the gap has been further narrowed.
Barring unforeseen circumstances, that trend will continue. At present rates of growth, China's economy should double in size by 2020, reaching about US$16-trillion on a purchasing power parity basis. Using rough 20-20 vision, the U.S. economy, having grown about 3% to 4% on average a year, will be around US$20-trillion. Look forward to 2025, and China might have edged ahead on this basis.
Meantime, if the renminbi were priced by Beijing to accurately depict its value against the U.S. dollar, China's economy would look even bigger in today's and the future's terms.
Of course, it must be noted that the sheer size of China's population, at 1.2-billion, is responsible for the sheer size of the economy. At the other end of the scale, those great numbers in the world's No. 2 economy also mean that the average Chinese citizen ranks No. 133 in the world in terms of per-capita GDP. Indeed, tens of millions of Chinese still exist on less than a dollar a day.
That also means there is lots of upside to income and economic growth. If, one day, the average Chinese got to just half the average annual income of Americans, who today number 306 million, that would mean China would have twice the U.S. GDP.
For sure, China has its problems, including environmental ones that won't be easily addressed, if ever. There are shortages of water and power, the latter often meaning industrial capacity lies idle.
Lurking in the background, too, is the question of population itself. In the one-child country, a falling population and rising age level will produce an unhealthy mix for social services and will ultimately curb economic growth.
The East-West Centre notes that only 30 years ago, Japan had the youngest workforce in the industrialized world. Today, it has the oldest and two years ago the country's population began to fall, with monumental implications for society and the world's third-largest economy. China's population will fall, too, creating similar problems on a larger scale.
Meantime, the China story remains very much intact, the tiger roaring and eating our lunch, much of it through the almost trillion dollars of U.S. Treasury debt it holds in its reserves.
Thirty years ago at The Financial Times of Canada, we might have bet it could have been the other way around, with a consumer goods-hungry China owing the rest of the world.
I toiled as an editor at The Financial Times of Canada in Toronto 30 years ago, one of our top writers, an old Hong Kong hand, would occasionally write about the coming emergence of China's economy. He would argue persuasively that more than a billion Chinese would soon be buying our TVs and Chevies, a vast market waiting to be exploited, an endless opportunity for savvy exporters.
As it happened, China turned the export equation on its head. As 2010 dawns, the expectations of 1980, triggered by Beijing's economic reforms beginning in 1978, have been dashed, with most of the goods going across the Pacific heading the other way. While the flow of raw materials to China from North America is impressive, many of those boatloads of stuff are being fashioned by cheap and plentiful labour into goods to be shipped back in millions of containers and on to the shelves at our malls.
You may be forgiven for thinking that last year was the year of the Tiger (Woods). In fact, on the Chinese calendar, 2010 is the year of the tiger. And though the year doesn't officially begin till Feb. 14, China has been acting like a tiger for decades now, roaring mightily and happily eating our lunch.
Indeed, as the University of Hawaii's East-West Center noted this week as it celebrated 50 years of promoting understanding of the Asia Pacific region and the United States, the whole of Asia will continue to lead world economic growth for years, perhaps decades, to come, with China leading the way.
Charles E. Morrison, president of the East-West Center, said in a recent commentary that Asia's rise to economic prominence is not unprecedented. "Two hundred years ago, eastern and southern Asia accounted for half the world's goods and services, but by 1960 had shrunk to less than 20%. But in the past 50 years, Asia has made a remarkable comeback to about 35% of the world economy today, and by the middle of this century or even earlier, it should again reach 50%."
So, the 21st century will be Asia's - and especially China's - century.
The Chinese tiger, growing by 8% to 10% annually, will continue to lead the Asian advance. Already, China's gross domestic product in purchasing power parity, a measure that most economists rate highly, is second only to that of the United States, which was US$14.4-trillion in 2008. China's was US$8-trillion. And with the U.S. economy shrinking last year and China steaming ahead about 8%, the gap has been further narrowed.
Barring unforeseen circumstances, that trend will continue. At present rates of growth, China's economy should double in size by 2020, reaching about US$16-trillion on a purchasing power parity basis. Using rough 20-20 vision, the U.S. economy, having grown about 3% to 4% on average a year, will be around US$20-trillion. Look forward to 2025, and China might have edged ahead on this basis.
Meantime, if the renminbi were priced by Beijing to accurately depict its value against the U.S. dollar, China's economy would look even bigger in today's and the future's terms.
Of course, it must be noted that the sheer size of China's population, at 1.2-billion, is responsible for the sheer size of the economy. At the other end of the scale, those great numbers in the world's No. 2 economy also mean that the average Chinese citizen ranks No. 133 in the world in terms of per-capita GDP. Indeed, tens of millions of Chinese still exist on less than a dollar a day.
That also means there is lots of upside to income and economic growth. If, one day, the average Chinese got to just half the average annual income of Americans, who today number 306 million, that would mean China would have twice the U.S. GDP.
For sure, China has its problems, including environmental ones that won't be easily addressed, if ever. There are shortages of water and power, the latter often meaning industrial capacity lies idle.
Lurking in the background, too, is the question of population itself. In the one-child country, a falling population and rising age level will produce an unhealthy mix for social services and will ultimately curb economic growth.
The East-West Centre notes that only 30 years ago, Japan had the youngest workforce in the industrialized world. Today, it has the oldest and two years ago the country's population began to fall, with monumental implications for society and the world's third-largest economy. China's population will fall, too, creating similar problems on a larger scale.
Meantime, the China story remains very much intact, the tiger roaring and eating our lunch, much of it through the almost trillion dollars of U.S. Treasury debt it holds in its reserves.
Thirty years ago at The Financial Times of Canada, we might have bet it could have been the other way around, with a consumer goods-hungry China owing the rest of the world.
