Miracle or mirage?

Chinas phenomenal growth

China’s rise didn’t take place in isolation and with the US and Europe in decline, it is unlikely to be sustained through domestic market.

China’s economic expansion in the last three decades by any stretch of imagination appears to be a miracle. But miracles are hardly enduring. Chinese miracle may turn into a mirage in the wake of adverse external developments or internal upheavals or a combination of both.

Books, articles, research papers and commentaries are myriad on the Chinese miracle.

China overwhelms any visitor from any part of the world due to its economic accomplishments, urban development, poverty contraction and military expansion.

In a span of about three decades, a poor, developing and inward-looking country has become the second largest global economy, largest manufacturer, biggest exporter, largest consumer of luxury goods, largest holder of foreign exchange, largest banker to the richest country in the world and the most resilient economy in the face of global economic downturn.

The Chinese people think big, do big and dream big too. The new leadership, put in place by the recent 18th National People’s Congress, has continued to set lofty goals to perpetuate the miracle. It has vowed to double the country’s GDP in 2010 figures and per capita income by 2020.

The Chinese leadership intends to create a ‘moderately prosperous’ country and a ‘happy society.’ Can they do it?

Going by past record many may believe that they will. But outsiders are perhaps more sanguine than Chinese experts. People in China are increasingly becoming aware of the cost of their miracle that have enamoured the outside world. China has become the largest polluter with numerous cities missing their blue skies. Tall concrete buildings, super highways, long mountain tunnels with wide roads and bustling bazaars are no doubt highly impressive. But they accompany a huge middle class whose appetite is going beyond good food and fancy clothes; a large pool of educated unemployed frantically looking for jobs; a still larger section of poor people that is waiting eagerly to be uplifted.

According to a recent report, China’s official definition of ‘poor’ is a person who earns less than 2300 RMB per year and that is less that 200 RMB per month (roughly $1 day). There are 11 million poor people in Guizhao province alone on the basis of this definition. Can China uplift these people and make them part of the ‘happy society?’

While thousands of billionaires and millionaires are the pride of China today, the deprived section of the populace is not unaware of the rampant corruption all over the country. It is not a usual warning from a government leader in China when the new general secretary of the Chinese Communist Party Xi Jinping remarks that unless corruption is tackled in time, it may result in the collapse of the party. It is an extraordinary ‘wake up call’ and it signifies the extensiveness of corruption in the country.

Economic miracle

 Moreover, China’s economic miracle was not a 100 per cent made-in-China phenomenon. The US decision to open up China during the Nixon administration for political reasons and other successive administrations’ policy of expanding  economic ties with China even at the cost of huge trade deficit; the decision by the Europeans, Japanese and other Asian allies to follow the American footsteps also had a critical share in the economic success story of China.

On its part, China adopted a cooperative neighbourhood policy, publicised its ‘peaceful rise,’ allowed foreign companies to do business on its soil and consistently prospered.

When the European and American economies began to falter in recent years, China has got naturally affected. Chinese exports are down, double-digit growth rate has plummeted, some key industries have begun to underperform and even the labour cost has risen. In simple words, rise of China has not taken place in isolation and it is unlikely to be sustained just by engineering domestic balancing.

China’s ‘peaceful rise’ rhetoric has also ended. Sino-Japanese spat over Diaoyu/Shenkaku Islands; China’s territorial disputes in South China Sea with Vietnam, the Philippines, Malaysia, Brunei and Taiwan; Beijing’s reassertion of its territorial claims over Arunachal Pradesh and Aksai Chin in recent years have justified fear in certain quarters that China’s rise will lead to its aggressive foreign policy, turning Asian strategic landscape turbulent and tension-ridden. This inevitably will impact China’s economic relations with the outside world in coming years.

If Beijing’s new leadership return to the old rhetoric of ‘peaceful rise,’ it is simply not going to sell. If it continues to flex its muscle in East China Sea, South China Sea and along its border with India, Sinophobia may spark strategic rebalancing in Asia.

Interestingly, the perceptive Americans have just begun some sort of rebalancing. India’s tit-for-tat response to China’s map diplomacy, Japan’s unprecedented assertiveness on Island dispute, Vietnamese and Filipino assertion over South China Sea dispute during the recent East Asia summit are signals for the future. 

Miracles are not ever lasting. Industrial Revolution in Britain, American economic expansion during the ‘Roaring Twenties,’ and regional integration in Europe in the form of EU until recently were all miracles of some kind. Chinese miracle will disappear, if the European and American economic recovery are delayed further and Sinophobia in Asia takes deeper root.

‘Moderately prosperous’ country and the ‘happy society’ plans may just be put on permanent hold.