Friday, April 21, 2006

The China chance

China has received blame all around. For rising oil prices. For vaccuming up all the foreign investments. For grabbing markets for consumer manufactures, such as apparel, footwear, textiles, toys...

China - a country of 1.2 billion, where per capita GDP (PPP-adjusted) has risen over tenfold from 1980 to 2002 (reference). Now the second biggest economy in the world, thanks to decades of rapid economic growth.

What's not to fear from China? Lots. (See this link.) It's showing the early stages of the classic Lorenz-curve pattern - with inequality rising initially during growth. Back in 1980, the Gini ratio was 0.2 (quite equal), but now it is 0.45 (about the same as the Philippines.) Not good for social stability. The type of growth that has been pursued showns signs of unsustainability, in the environmental sense:

Rapid industrialization is producing massive environmental devastation. China is the world’s second largest greenhouse gas emitter (the U.S. is first). About 60 percent of China’s major rivers are classified as being unsuitable for human contact. Seven of the ten most polluted cities in the world are located in China. Air pollution alone claims 300,000 lives prematurely per year. Acid rain falls on 1/3 of the territory. More than 1/3 of industrial wastewater and 2/3 of municipal wastewater is released into waterways without any treatment. Over the last few decades, increased industrial agriculture and commercial grazing has resulted in creating over 2.67 million square kilometers of desert land—around 27.9 percent of China’s total territory. Many claim that foreign investment and the introduction of “green” technology will help clean up the environment in China; however, this has not been the case to date. One of the reasons for this is because China’s State Environmental Protection Agency (SEPA) has little authority. SEPA estimates that although water treatment facilities are installed in most major industrial plants under government mandate, round one-third are not operated at all and another one-third operate occasionally. Often the fines it levies are less than the expenses of using the “green” technology. (Business Week, August 22, 2005)
Well I for one am hoping that it's rapid export-oriented growth is sustained. A competitive Chinese export sector means cheaper products which we can import. And a big Chinese economy means a big market to send our goods. In 2000 the export share of China was only 1.74%; in 2005 it was 9.86% and growing. In terms of value, exports to China in 2000 were only US$ 663 million; in 2005 it was over 4 billion, more than a sixfold increase. You may not realize this, but our imports from China in 2005 was only US$ 256 billion. (So what's all that "made in China" stuff? Well it turns out that China exports to other countries, which export back to us the made in China stuff.)

The global economy is not a zero sum game where one country becomes better off only if others become worse off. Simultaneous growth is a very real, in fact very realistic, prospect.

No comments: